Agglomeration as spatial interdependence between firms and households

The purpose of this paper is to provide a rational for the agglomeration of firms and households over a linear space. A state of comprehensive spatial interdependence is obtained by assuming that every household patronizes several firms. Within this context, supply follows the theory of spatial competition generalized to allow for an endogenous demand structure; and demand follows the tradition of urban economics generalized to allow for an endogenous supply structure. Agglomeration emerges through the interplay between spatial boundaries, trip dispersion, and the existence of positve profits.