Limited developers

This paper considers the role of developers in the formation of cities. Existing treatments of the location of economic activity between cities either ignore developers entirely (e.g., Stiglitz 1977) or endow them with limitless power (e.g., Henderson 1988). Reality lies somewhere in between: most cities have been partly shaped by the actions of developers, but even the largest developers are limited. In this paper organizational limits to developers are discussed, and a model of a system of cities is presented in which a land assembly problem may prevent developers from acquiring efficient amounts of land. We examine the consequences of land assembly for land prices, city sizes, and infrastructure provision. We show that limited developers may not attain an efficient allocation of resources.