Optimum vs. Equilibrium Land Use Pattern and Congestion Toll

This paper presents a comparison between optimum and competitive land use patterns within an urban area. The concept of equilibrium in this paper pertains to five sectors: households, housing producers, composite commodity producers, land transactors and transportation authority. The concept of optimum referred to in this paper is the maximum utility level which can be realized provided that equals are treated equally. This optimum allocation can be supported by a competitive price system if a warranted congestion toll is collected by the transportation authority and redistributed as a lump sum subsidy. If less than the warranted congestion toll is collected, the resulting competitive allocation is distorted and then the competitive city tends to be more suburbanized than the optimum city.