Configuration of cities: the effects of congestion cost and government.

In this paper we have developed a model that explains the existence of metropolitan areas. We have obtained that increasing returns to scale and the existence of transportation cost are factors that favor agglomeration and, on the other hand, that congestion cost works against this agglomeration. Furthermore, the government can modify the values of several parameters and so it must decide what amount of resources to invest in congestion and transportation in order to reduce respective costs in such a way that society is better off.Monopolistic competition; Centripetal forces; Centrifugal forces; Congestion cost;