Consumption variety and urban agglomeration

We consider two types of consumers, who prefer different classes of non-tradable goods. Each consumer's utility increases with the number of different goods available, and increases more with an increase in the variety of goods he prefers. Such preferences can lead to urban agglomerations, concentration of different types of consumers in different cities, agglomeration of industries which use similar types of workers, and investment in facilities which attract more customers of one type over another. (C) 2003 Elsevier B.V. All rights reserved.