Market Impacts on Land-Use Change

Abstract

Land-use change in a market economy, particularly at the urban-rural fringe in North America, is shaped through land and housing markets. Although market activities are at the core of economic studies of land-use change, many market elements are neglected by coupled human-environment models. We scrutinized the effects of the level of detail of market representation using an abstract, agent-based model of land-use change. This model includes agents representing land buyers and sellers and their respective market-based decision-making behaviors. Our results show that although incorporating key market elements, particularly budget constraints and competitive bidding, in land-use models generally alters projected land-use patterns, their impacts differ significantly depending on the level of detail of market representation. Consistent with theories of land change, our research confirms that budget constraints can considerably reduce the projected quantity of land-use change. The effects of competitive bidding, however, are more complex and depend on buyers' budgets, their relative preferences for proximity versus open-space amenities, and the size of neighborhoods. Market competition might reduce or increase the quantity of land-use change and the degree of sprawl in the simulated landscapes. Because of the strong effects of market elements on resulting patterns, adequate representation of the structure of markets is important for capturing and characterizing the complexity inherent in coupled human-environment systems.