Regulation, land-use mix, and urban performance. Part 1: theory

In this paper we present the theoretical model underlying a series of exper iments that use cellular automata (CA) simulations to explore the impact of alternative systems of pollution property rights on urban morphology and p erformance. It is a partial equilibrium model of developer and community be haviour which allows a formal expression of the urban development processes under alternative regulative regimes. These include pure markets; impure m arkets without government; voluntary agreements on externality solutions; c lubs and other near-market mechanisms of supplying quasi-public goods; and rigid zone-planning. In a second paper we describe how the model is embedde d in a nondeterministic CA algorithm that yields simulated land-use pattern s. Because the simulations are based on behavioural theory rather than ad h oc cell-transitions rules, they also yield meaningful urban performance ind icators such as total, average, and marginal private profits and social cos ts. These permit tests of conventional urban economic theory within an expl icit spatial framework.