Agglomeration in a linear city with heterogeneous households

This paper develops a general equilibrium model with consumers heterogeneous in endowments and tastes. An agglomerative linear city is generated due to gains from trade rather than interaction externalities or market imperfections. An equal-treatment social optimum is shown to have a competitive price support. When preferences are location-independent, there is no population agglomeration. When a geographical factor, leisure, enters the utility function, the residential relocation process is agglomerative if the immobile and mobile goods are weakly Pareto complementary. Under general cross-preference structures, deglomeration may emerge, and the population density and the shadow price of land might not be positively correlated.