Interregional Price Flexibilities: An Application to the Fed Beef Industry

Within spatially complex economic systems, it is given that change in a commodity's production in one region engaged in interregional competition will influence the price of that commodity in all trading regions. Mathematical programming models provide useful tools to predict such price alterations for specified production changes. Unfortunately, only running and analyzing many alternative formulations of such a model can generate an understanding of the relationships among regions involved in interregional competition. Specifically, this paper addresses itself to formalizing this process and providing quantitative measures summarizing the impact of regional changes in production upon prices in all regions. This paper is concerned with quantitatively estimating the influence of a change in fed beef production for given regions upon prices of fed beef for all regions of the United States. From estimates of these relationships, economic measures of isolation of regions and the impact of changes in import levels upon regional prices will be developed. Thus, unlike much previous research in the area of interregional competition in the beef industry, focused upon finding an “optimum†solution to a mathematical programming model, this research examines the basic economic relationships among regional production and regional prices implied by an interregional competition model.