Abstract
A partial equilibrium model of land, labor, and transportation markets in an information-oriented city with traffic congestion of commuting and agglomeration economies of interaction is presented. The equilibria are derived by numerical computations using specific utility, production, and congestion functions. The laissez-faire equilibrium is compared with the optimum. In contrast with the results of many prior papers in this area, at the optimum the central business district becomes compact and the city more suburbanized than the laissez-faire equilibrium. The paper also analyzes the effects of a Pigouvian tax system and subsidies on the spatial structure in the city.