Theory – dynamic model
nAgglomeration supported by production externality
nIdentifies a steady-state allocation of land use and
productive capital
nTerrorism implies a risk of loss of structures (capital)
at any location where density
exceeds a fixed level K0
nWith no adjustment costs –
•Terrorist attack implies lower steady state capital at all locations
•Capital density gradients have reduced range
nPublic policy
•Subsidy to support agglomeration
•If public sector has private knowledge about attack risk – can improve efficiency