OK, here it is, I’ll try to explain this urban behavioral model, The Gravity Model, as clearly as I can. It would probably be tricky to follow but fortunately, I’ll elaborate later on. So, deep breath…
My goal here is to show the mathematical equivalent of (don’t panic) Nash equilibrium on a large scale with many players. Just as in the example of the ice cream vendors, I am looking for the easiest way to explain why businesses are clustered in the city, using the simplest possible model.
Congestion fees have recently been presented as the tool to solve all urban problems. Economists vouch for it, city leaders praise it, and only the general public dislike it.
“The general public is dumb”, say some economists. “They don’t know what’s good for them”.
“It will only improve the lives of people who live in the periphery”, say economists living in the center of metropolitan areas.
“You are suspicious for nothing”, they conclude after considering data from other economists living in central cities like London, Stockholm or Singapore.