Do plans matter? A game-theoretic model for examining the logic and effects of land use planning

Although state and local growth management programs vary widely, nearly all such programs include one common feature: they require local governments to plan. While there has been extensive research on the effects of growth management in general and on specific policy instruments to manage urban growth there has been little research on the effects of planning. In this paper we present a game-theoretic model of urban development in which a rational local government plans. The model illustrates how planning can serve to guide local government decision making, how land market participants might respond to local government plans, and how planning in a dynamic context can increase social welfare. By considering local government as a player who plans rather than as an external disturbance that might regulate, we can discover insights and frame hypotheses about the efficacy of planning that are not possible in other urban economic models.