david ricardo came up with the bid rent theory.
david ricardo came up with the bid rent theory.
who came up with the bid rent theory?
david ricardo
although later used in the context of urban analysis, though not yet using this term, the bid rent theory was first developed in an agricultural context. one of the first theoreticians of bid rent effects was david ricardo, according to whom the rent on the most productive land is based on its advantage over the least productive, the competition among farmers ensuring that the full advantages go to the landlords in the form of rent. this theory was later developed by j. h. von thünen, who combined it with the notion of transport costs. his model implies that the rent at any location is equal to the value of its product minus production costs and transport costs. admitting that transportation costs are constant for all activities, this will lead to a situation where activities with the highest production costs are located near the marketplace, while those with low production costs are farther away.
bid rent theory
the bid rent theory is a geographical economic theory that refers to how the price and demand for real estate change as the distance from the central business district (cbd) increases. it states that different land users will compete with one another for land close to the city centre. this is based upon the idea that retail establishments wish to maximize their profitability, so they are much more willing to pay more for land close to the cbd and less for land further away from this area. this theory is based upon the reasoning that the more accessible an area (i.e., the greater the concentration of customers), the more profitable.
bid rent theory