CITY FORMATION WITH COMMITMENT

This paper examines the dynamics of city formation. The process is described as a non-cooperative game where city developers provide a public good. When a finite number of developers choose public good levels simultaneously, the symmetric equilibrium features underprovision. If a developer is able to commit to a provision level prior to his rivals' choices, the developer will select a larger level. It is possible that the leader will still underprovide, but the degree of underprovision is less than in the simultaneous game. It is also possible that the leader will overprovide. In either case, the leader claims a larger share of the aggregate population. Finally, this model provides an explanation for urban projects whose scale cannot be justified by the projected population of the city in which they are constructed: the purpose of these projects may be to preempt other cities, and win for the city that develops first a larger share of the aggregate population.