Fujita and Ogawa revisited: an agent-based modeling approach

This paper builds on and extends a classic paper (hereafter referred to as F – O) published by Masahisa Fujita and Hideaki Ogawa in 1982. Their paper models the emergence of urban centers brought about by household and firm location decisions in the context of spatially differentiated labor and land market interactions. Their approach is an analytical one that seeks to characterize the equilibrium values of the system. In contrast, we employ an agent-based modeling (ABM) approach that seeks to replicate the individual household and firm behaviors that lead to equilibrium or nonequilibrium outcomes. The F – O model has little to say about what happens outside of equilibrium, while the ABM approach is preoccupied with this question and is particularly well suited to address questions of path dependency and bounded rationality that lie well beyond the scope of the F – O original. We demonstrate that the urban outcomes that emerge depend critically upon the bidding behavior of agents and the institutional context within which their decisions are made.