Bid rent theory

Bid Rent Theory was developed by William Alonso in 1964, it was extended from the Von-thunen Model (1826), who analyzed agricultural land use.

This theory is based upon the reasoning that the more accessible an area (i.e., the greater the concentration of customers), the more profitable.

It could be assumed that, according to this theory, the poorest houses and buildings would be on the very outskirts of the city, as this is the only location that they can afford to occupy.

In modern times, however, this is rarely the case, as many people prefer to trade off the accessibility of being close to the CBD and move to the edges of a settlement, where it is possible to buy more land for the same amount of money (as the bid rent theory states).

Likewise, lower-income housing trades off greater living space for increased accessibility to employment.

As one goes farther out, the land becomes less attractive to industry because of the reducing transportation linkages and a decreasing marketplace.

Because householders do not rely heavily on these factors and can afford the reduced costs (compared with those in the inner and outer core), they can purchase land here.