Modelling Hierarchy and Specialization of a System of Cities from an Evolutionary Perspective on Firms’ Interactions

Despite their great diversity, most systems of cities show remarkably similar patterns when comparing the size distribution and the economic specialization of their constitutive cities. The universality of these patterns sparked the interest of geographers, economists and physicists. However, until now, no economic model has relied on a micro-based and evolutionary approach to reproduce these regularities. In this chapter, we intend to fill this gap by proposing a model where the micro dynamics of localized firms generate the two macro regularities of size distribution and economic specialization. The model is based on boundedly rational firms’ competition and path dependent innovation. We discuss the possible emergence of macro properties from these micro behaviors of firms.