A game-theoretic approach to urban land development in China

Shih-Kung Lai, C. Ding, Po-Chun Tsai, I-Chih Lan, Minsheng Xue, Ching-Pin Chiu, Li-Guo Wang

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The property rights approach to urban development has recently been proposed in the planning literature to explain how urban systems self-organize spatially and institutionally. The land-tenure system is one of the key factors affecting land use and thus urban development. It is not clear, however, how such a factor affects the process of urban development. This research aims to provide reasonable explanations as to how the land-tenure system in China in general affects urban development, by building game-theoretic models which include plans as a manifestation of information and property rights as a manifestation of land-use rights. Viewing regulated development as a collective good, the model is based on the prisoner’s dilemma game, where the local government regulates and the developer makes development decisions. Preliminary results show that land rights in the transitional economy of China are of paramount importance and must be clearly specified in order to make the land development process efficient at reducing transaction costs.