ABSTRACT
Finally, if the neighborhood quality and a resident's own maintenance are complements in the utility function of the resident, then mUltiple equilibria may arise as shown by Schall [86] and Stahl [96]. In the complementarity case, a resident's maintenance expenditure is lower when the neighbors' expenditure is also lower, leading to an equilibrium where everybody maintains a low level of upkeep as well as others with higher levels of upkeep. With multiple equilibria, it is quite possible that the neighborhood is stuck at an equilibrium with very low levels of upkeep even though another equilibrium with higher levels of upkeep is both Pareto superior and locally stable. In such a case, a large scale redevelopment may be able to move the neighborhood to a more efficient equilibrium. This argument may be used to justify government intervention to encourage redevelopment programs. It is, however, very difficult to determine whether or not there actually exists another stable equilibrium with higher levels of upkeep.
