Alonso translated von Thünen's agricultural rings into a theory of the modern city. Every household and firm has a bid-rent function - the most it will pay per unit of land at each distance from the centre, trading commuting cost against space - and land goes to the highest bidder, producing a declining rent surface and a sorting of uses and incomes by distance. Offices outbid shops for central sites; households that value space over accessibility move outward, so density and building height fall with distance. Muth and Mills extended the model into the standard monocentric framework of urban economics, whose assumptions later polycentric research had to relax.
Bid rent gave planners a formal account of why land values, densities and heights decay from the centre, and why an accessibility improvement reappears almost immediately as land price. It is the reasoning behind FAR gradients, transit value capture and the durable critique that cities have outgrown the single centre it assumes.
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