Our model suggests that an improvement in telecommunications will make cities more appealing in the future, if at a particular point in time urban residents use more telecommunications than rural residents. Briefly, in our model, agents must decide between a private project and a joint project. Before deciding, individuals learn the return to their private project and compare it to the expected return of a joint project. The returns of the match include all possible gains to the relationship, from information to friendship to financial gains from an explicit transaction. Based on the quality of the match, the individual must also decide how intense the relationship should be.
Time is available at a given cost.
Time spent in telecommunication contributes directly to match intensity. Optimal match intensity for each means of communications will be found by setting returns equal to the marginal cost of intensity, which is just the marginal cost of time. There are two important cutoff points for the quality of a match. The first is the minimum level of match quality for which any further contact is sensible. This effect makes telephones and meetings substitutes.