A computable general equilibrium model of urban land use is developed with land allocated to houses, production, and roads. Traffic congestion and employment location are endogenous. Consumers choose job and home locations and want to shop everywhere. Without scale economies in shopping, production is dispersed with rent, wage, commodity price, and net density gradients all peaking at the center of the space. When scale economies in shopping are strong relative to the cost of traffic congestion, dispersion becomes unstable. Multiple equilibria emerge as production agglomerates into a number of centers. Our algorithm tests the stability of equilibria and finds perturbations that set off transitions to other equilibria. The number of centers trades off the benefits from agglomeration against those from access. With stronger agglomeration, there are fewer and bigger centers and utility is higher with fewer centers. With higher congestion, the number of centers increases and utility is higher with more centers. © 1996 Academic Press, Inc.
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