Bid-Rent Analysis

Bid-rent analysis is the urban-economics theory that explains how land rent and land use are organized by distance to the city centre. Developed by William Alonso in 1964, it represents each land use — commerce, industry, housing — by a bid-rent curve giving the maximum rent that use is willing to pay at each distance from the central business district. Because uses with steeper curves outbid others for central land, the observed rent is the upper envelope of all the curves, and the city sorts into concentric zones with the highest bidder winning each ring.