DP1550 On the Strategic Community Development

Author(s): Vernon Henderson, Jacques-Fran├žois Thisse
Publication Date: January 1997
Keyword(s): Land development, Strategic pricing, Tax Competition, Tiebout Model
JEL(s): H7, L13, R51
Programme Areas: Industrial Organization
Link to this Page: www.cepr.org/active/publications/discussion_papers/dp.php?dpno=1550

This paper examines strategic behaviour of developers who, through offering different public good packages and revenue/fiscal schemes, compete for residents who are differentiated by income. There is an endogenous determination of numbers and sizes of communities. Developers have an incentive to strongly differentiate their public good offerings. In terms of pricing strategies, developers exhibit sharply contrasting behaviours. In low-income communities housing consumption is subsidized once lots are priced. In high-income communities housing consumption is generally taxed.