Bid rent theory
This article includes a list of general references, but it lacks sufficient corresponding inline citations. (August 2009) |
The bid rent theory is a geographical economic theory that refers to how the price and demand for real estate change as the distance from the central business district (CBD) increases. It states that different land users will compete with one another for land close to the city centre. This is based upon the idea that retail establishments wish to maximize their profitability, so they are much more willing to pay more for land close to the CBD and less for land further away from this area. This theory is based upon the reasoning that the more accessible an area (i.e., the greater the concentration of customers), the more profitable.
Explanation
Land users all compete for the most accessible land within the CBD. The amount they are willing to pay is called "bid rent". The result is a pattern of
It could be assumed that, according to this theory, the poorest houses and buildings would be on the very outskirts of the city, as this is the only location that they can afford to occupy. In modern times, however, this is rarely the case, as many people prefer to
Agricultural analogy
Although later used in the context of urban analysis, though not yet using this term, the bid rent theory was first developed in an agricultural context. One of the first theoreticians of bid rent effects was
The concentric land-use structure thus generated closely resembles the urban model described above: CBD – high residential – low residential. This model, introduced by William Alonso, was inspired by von Thünen's model.[1]
Bid rent theory in the central business district
Land users, whether they be
As one goes farther out, the land becomes less attractive to industry because of the reducing transportation linkages and a decreasing marketplace. Because householders do not rely heavily on these factors and can afford the reduced costs (compared with those in the inner and outer core), they can purchase land here. The farther from the inner core, the cheaper the land. This is why inner-city areas are very densely populated (with, e.g., terraces, flats, and high rises), while suburbs and rural areas are more sparsely populated (with semi-detached and detached houses).
Application of bid rent theory
Bid rent theory has been operationalized in agent-based modelling, where it has been used to simulate the conversion of agricultural land into urban development, in a concentric city model.[2]
References
- S2CID 154746006.
- ^ Tatiana Filatova, Dawn Parker and Anne van der Veen (2009-01-31). "Agent-Based Urban Land Markets: Agent's Pricing Behavior, Land Prices and Urban Land Use Change". jasss.soc.surrey.ac.uk. Retrieved 2021-02-20.
Sources
- Location and land use, 1964, by William Alonso.
- "Essential AS Geography", 2000 By Simon Ross, John Morgan and Richard Heelas.