NYC-WTC_000187725

NYC 9/11 Public Portal Document

28 ! I and costs and the induced changes in the equilibrium rents i reflecting the modal split, residential location, and shopping travel adjustments). ij o The aggregate value of the producer surplus change (real estate operating profits from increased sales or rents, fully capitalized as increases in land value) accruing to the owners of residential and commercial real estate.

How NYREG is Designed

The fact that NYREG is a microeconomic model has three specific meanings for its design. First, it means that appropriate attention has been given to the behavior of travelers and households whose income, costs, prices and utility functions are modeled in a way compatible with modern microeconomic analysis. Second, it means that NYREG has a clearly defined demand side as well as a supply side. Finally, the microeconomic nature of the model means that equilibrium adjustments are computed by simulating the action of market prices which are determined so as to balance demands with supplies in the relevant dimensions. This requires more than 800 simultaneous equations which must be solved jointly in order to find the equilibrium prices (such as rents of various housing submarkets). From these equilibrium rents all other needed equilibrium outputs and benefit measures are directly computed. The demand side of NYREG is designed as a unified model of the joint decision to choose a residence zone, a mode of travel for the daily commute from the fixed work zone to the chosen residence zone, and the number, destinations, and modes of an annual package of shopping trips originating at the chosen residential zone. The model is based on an appropriate view of the household as a decision making unit and allows (by means of an approximating assumption) for the presence of multiple workers in a household. The model follows the discrete choice approach in order to derive a satisfactory probabilistic formulation of household behavior as well as to insure computational feasibility The supply side of NYREG is considerably simpler than the demand side primarily because supply side data are more limited. First, supply side adjustments are limited to the behavior of the owners of existing housing and commercial floor space. The possible construction or demolition of housing and commercial space in response to changes in prices and rents is not modeled. Hence, the supply function models the short run response of residential and commercial space generating a utilization rate for existing

2 The theoretical, empirical and computational advantages of using discrete choice formulations in the development of urban models has been documented in detail in Anas (1982) and are, therefore, not discussed here.

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NYC-WTC_000187759