EXAMINING VON THUNEN'S LOCATIONAL THEORY THROUGH A BID RENT PERSPECTIVE

Abstract

Commuting cost is the main determinant of the land rent gradient (Alonso, 1964). The bid rent theory explains the reason to have greater accessibility. Lower commuting costs contribute to the higher rent incurred to live near the city centre where there is high employment being the most economic part of the city. Monocentric city is perceived unrealistic but it is a basic pattern model (Mills, 1972). Hence, it depends on how one applies the most suitable model (Kraus, 2003). The linkage between commuting distances and land rent is most often studied by hedonic price function tool where locational factors are isolated and analysed. This evaluation empirically explains the evolution of monocentric city to polycentric city model. However, hedonic pricing on land or housing through market transactions data only identifies the equilibrium rent and not the bid rent of a city. At an individual’s perspective, be it a firm or a household, this bid rent function explains the interactions between rent and land uses where the changes within the bid rent signifies the types of uses or properties on a land. Hence, we use the contingent valuation to fill this research gap as it covers the unobservable variables at its survey approach, which hedonic price regression cannot inculcate. It is often perceived inferior to hedonic pricing but it is useful for township land use planning. By investigating the willingness to pay with relation to the accessibility to the city centre, contingent valuation analyses the interactions of bid rent price function with regards to the land uses which hedonic pricing cannot achieve. On the hypothesis that commuting costs influence the decision of a housing location, an ideal study area was chosen to conduct the analysis. Ang Mo Kio is chosen as it is established as an excellent transportation node in addition to its centralised location where it provides great accessibility to the city centre. This is an ideal location to study the impact of commuting costs towards a housing location. The basic result of the study shows that the effect of commuting costs is indeed significant to the housing locale of the respondents after surveying their willingness to pay if they were to stay at various distances to the nodes of travelling like MRT, 4 expressways and workplaces. What can be noted from the study is that the findings obtained can aid the government and town planners in the planning of a local city. While planning for housing developments, the developer and town planners have to take into account the factors of distance and transportation as these two are closely related to the affordability level for a homebuyer. Secondly, this study will also aid the homebuyers in choosing their housing location as distance, which is related to the transportation costs, is a primary concern. Lastly, the study aims to stimulate youths’ involvement, as it will facilitate more discussion regarding this national issue. Further research is encouraged to increase the quality of findings and hopefully, it would be beneficial to the knowledge of the academics and their studies.