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Information Technology and the Future of Cities: An Alternative Analysis

Department of Economics, Finance and Global Business, William Paterson University, 1600 Valley Road, Wayne, NJ 07474-0920, USA, panayidesa{at}wpunj.edu

Clifford R. Kern

Department of Economics, Binghamton University, State University of New York, PO Box 6000, Binghamton, NY 13902, USA, ckern{at}binghamton.edu

How will advances in telecommunications technology affect urban development? In this paper, we develop a general model where individuals involved in relationships use two modes of interaction, face-to-face and electronic communication. Each individual chooses the amount of interaction of each type to maximise her net pay-off from the relationships. Improvements in telecommunications technology may increase or decrease the demand for face-to-face interactions, depending on whether the cross-price elasticity of demand between face-to-face interactions and telecommunications is positive or negative. Embedding the model within a simple spatial framework shows that city size increases with electronic communications if the cross-elasticity is negative. The model presented here is closely related to that of Gaspar and Glaeser, and its conclusions are virtually identical, but they are derived from a simpler and arguably more descriptively accurate representation of the interdependence between face-to-face interactions and electronic communications.

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