Market forces in the development of cities relate to how the location decision of firms and households causes the development of cities. The nature and behavior of markets depend somewhat on their locations therefore market performance partly depends on geography.. If a firm locates in a geographically isolated region, its market performance will be different than a firm located in a concentrated region. The location decisions of both firms and households create cities that differ in size and economic structure. When industries cluster, like
Silicon Valley in California, they create urban areas with dominant firms and distinct economies. By looking at location decisions of firms and households, the urban economist is able to address why cities develop where they do, why some cities are large and others small, what causes economic growth and decline, and how local governments affect urban growth . Because urban economics is concerned with asking questions about the nature and workings of the economy of a city, models and techniques developed within the field are primarily designed to analyze phenomena that are confined within the limits of a single city . Market forces in the development of cities have been referred to by McCann as the changes in the development of human settlements and economic activities due to the location decision of business and households, since at times the way markets function by location determine the economic activities and the process of economic development . Firms located in distant or less connected locations typically have higher cost structures and limited trading opportunities compared to those that do business in large and dense cities. Over time, these choices of location result in different cities in size, economic structure and specialization. Industrial clustering, e.g., concentration of technology firms in Silicon Valley, how firms benefit from being close to each other (due to sharing labour markets, suppliers, knowledge) cities with different economic roles. Within this framework, urban and regional economists have focused on the increasing impact of virtual business-to-business (B2B) marketplaces on conventional location-based economic market forces. According to Fradkin, digital marketplaces ease the process for firms to locate buyers and suppliers by reducing the information and transaction costs that are commonly associated with physical distance . Research by Fan and Fang indicates that large B2B platforms like Alibaba can boost economic ties between cities and regions by connecting manufacturing zones , transport centres, and city centres, as it permits firms to access broader markets, while still avoiding having to relocate . Studies of the Chinese digital economy by Shang and Liu indicate that companies operating on large e-commerce websites are likely to stay within existing industrial clusters but obtain improved access to national and international markets . This implies that digital B2B marketplaces do not displace the importance of location, but serve as a support of existing patterns of specialization and clustering . By incorporating digital marketplaces into a framework of understanding firm location and market access, urban economics gains a better insight into how cities and regions are related across an increasingly digital economy. ==Land use==