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Alonso's Bid Rent Function

[Alonso's 3-dimensional 
graph]

A "Bid-Price Curve": A set of combinations of land prices and distances among which the individual is indifferent. It shows the land rent the household could pay at each distance in order to achieve a predetermined utility level (thus there is a bid price curve for every utility level). The bid price function answers the question: As the individual considers residential locations at different locations in the city, i.e. at increasing distances from the city center, what price of land would allow her to buy sufficient amount of land (and other goods) to enjoy as much satisfaction as a given (starting) price (and amount of land) at the city center.

The residential bid price curve is "the set of prices for land the individual could pay at various distances while deriving a constant level of satisfaction." (p.59)
Alonso stresses three points in his characterization of the bid price curve:

  1. every individual or household has her own bid price curve. Others have other curves
  2. every bid price curve represents a given utility level. There is family of bid price curves representing different utility levels, analogous to the wellknown indifference curves
  3. prices represented by the bid price curve have no necessary relations to actual prices: "A bid price is hypothetical, merely saying that, if the price of land were such, the individual would be satisfied to a given degree." (p.59)

The bid price function for the urban firm would be defined as follows: It describes the prices which the firm is willing to pay at different locations (distances from the city center) in order to achieve a certain level of profits.

Source: William Alonso, Location and Land Use, 1964.

See also:


Alonso, William (1933-1999)

Other Literature (related to Alonso urban land-use work):

Harrison S. Campbell, Jr., Bid Rent and Location Gradients: The Importance of Relative Location

Egan DJ, Nield K., Towards a theory of intraurban hotel location, URBAN STUDIES 37 (3): 611-621 MAR 2000 Times Cited: 0

In his seminal paper on the urban land market, Alonso notes that when a purchaser acquires land, he acquires two goods (land and location) in one transaction, and a single payment is made for the combination. Thus it is possible to trade off a quantity of land against location, the principle underlying Alonso's bid-rent analysis. It is argued that the Alonso model ... is still applicable to those types of economic activity which display a hierarchy of use in terms of distance from the city centre. The concern here is with hotel location,...


Clippings:

Workers trade long commutes for less expensive housing Seattle Times, Tuesday, May 28, 2002 [incl. by county commuting times data]By Rebecca Cook

"People are trading off housing and transportation, which is a classic thing people do," said census expert Richard Morrill, professor emeritus at the University of Washington. The census numbers say more about personal choices than traffic tie-ups. People generally accept a 25- to 27-minute commute, Morrill said. Pushed over that limit, most will make changes ...move closer to work or take a job closer to home


Return to: Geog.450 || Econ & Bus Geography
2002 [econgeog@u.washington.edu]