Commercial Revitalization in Low‐Income Urban Communities: The Holdup Problem and Urban Development Policy

15 Pages Posted: 9 May 2014

See all articles by Li Zhou

Li Zhou

University of Alberta - Department of Economics

Date Written: July 2014

Abstract

A commercial development model, based on Fujita's monopolistic competition model of spatial agglomeration, addresses firms' decisions to enter urban communities. The model focuses on commercial developers and large department stores, and identifies a potential holdup problem in the commercial development market arising because developers incur costs before negotiating with anchor tenants over profit sharing; the holdup problem is more likely to occur in low‐income communities where the profitability of commercial projects is small. The model predicts that direct incentives to developers are preferred to general tax incentives for addressing this market failure.

JEL Classification: R58, H50, H76

Suggested Citation

Zhou, Li, Commercial Revitalization in Low‐Income Urban Communities: The Holdup Problem and Urban Development Policy (July 2014). Contemporary Economic Policy, Vol. 32, Issue 3, pp. 545-559, 2014, Available at SSRN: https://ssrn.com/abstract=2434879 or http://dx.doi.org/10.1111/coep.12037

Li Zhou (Contact Author)

University of Alberta - Department of Economics ( email )

8-14 Tory Building
Edmonton, Alberta T6G 2H4
Canada

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