Developers’ Choices Under Varying Characteristic Time and Competition Among Municipalities

In a previous paper we demonstrated that spatial variation in characteristic time, defined as the time between acquisition of property rights and the realization of returns, can lead to leapfrogging and scattered development, especially during periods that interest rates are low or negligible. We explained this result by modeling the simple behavior of developers in the context of a single, linear city. In this paper we consider the case of two municipalities in which development policies, activities of non-governmental organizations and neighbors' behavior result in spatially varying characteristic time functions. Myopic behavior, in the sense that each city is interested only in what happens on its side of the municipal boundary, lead to unintended leapfrogging. Whereas competition between the cities, including in the case that each city takes into consideration processes in the entire region, results in intentional leapfrogging or in spatially concentrated development