Market areas in general equilibrium

This paper proposes a spatial model with realistic geography where continuous distribution of agents (e.g., farmers) engages in economic interactions one location from finite set cities). The structure the equilibrium consists tessellation, i.e., partition space into collection mutually exclusive market areas. After proving existence unique equilibrium, we characterize how borders and, case mobile labor, inhabited cities change response to shocks. To deal two-dimensional space, draw on tools computational geometry and theory shape optimization. Finally, provide an empirical application illustrate usefulness framework for applied work.