Economies of density

In microeconomics, economies of density express cost savings resulting from spatial proximity of suppliers or providers. Typically higher population densities allow synergies in service provision leading to lower unit costs. If large economies of density exists there is an incentive for people to concentrate and agglomerate.^[1]

Economies of density are not to be confused with economies of scale where unit costs are not linked to spatial properties.

Examples

Typical examples are found in logistic systems such as the distribution of goods (e.g. delivery of mail). Different network infrastructures such as electricity or gas networks show as well economies of density.

References

1. Jeffrey Lin (2012). "Geography, History, Economies of Density, and the Location of Cities." (PDF).

See also

• Economies of scale
• Economies of scope
• Network effects