Bargaining Power of Landlords and Underdevelopment in a System of Cities

We consider two models of a system of cities in which landlords have some power in negotiating rental prices at which lands are rented to develop cities. Analysis shows that the equilibrium city size is smaller than the optimal city size in a model in which city sizes are controlled by development companies or by local governments. Furthermore, it is shown that the equilibrium city size tends to be either smaller or larger than the optimal city size in a model in which city sizes are not controlled. These results point out the possibility of underdevelopment of cities. Corresponding author: Name: Yasuhiro Sato; Address: Graduate School of Environmental Studies (c/o School of Informatics and Sciences), Nagoya University, Furo-cho, Chikusa-ku, Nagoya, 464-8601 Japan; E-mail: [email protected] Running title: Bargaining and Underdevelopment