We develop a product-differentiated model where the product space is a network defined as a set of varieties (nodes) linked by their degrees of substitutability (edges). We also locate consumers into this network, so that the location of each consumer (node) corresponds to her "ideal" variety....

In a city where individuals endogenously choose their residential location, firms determine their spatial efficiency wage and a geographical red line beyond which they do not recruit workers. This is because workers experiencing longer commuting trips provide lower effort levels than those...