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A Dispersed Equilibrium Commodity Trade Model


  • Roy, John R


For many bulk commodities, such as mineral ores, crude oil, building materials and food grains, the suppliers are increasingly in the position of being price-takers. This means that, in the short run, their main decisions relate to spatial choice of markets and setting of production levels within the currently available capacity. In this paper, an entropy maximization framework is introduced to handle dispersion about the profit-maximizing choice of markets and production levels by the suppliers. The model also uses information theory to implicitly account for certain rigidities in trading relationships resulting from non-price factors. Although demand functions must be provided exogenously, cost functions can be inferred from regional vintage production data, which in turn allow profit functions to be defined for each producing region or country. A unique and stable dispersed price equilibrium of the Walrasian type is established for this spatial system under quite general conditions.

Suggested Citation

  • Roy, John R, 1990. "A Dispersed Equilibrium Commodity Trade Model," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 24(1), pages 13-28.
  • Handle: RePEc:spr:anresc:v:24:y:1990:i:1:p:13-28

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    References listed on IDEAS

    1. Nicolaas Groenewold & Alfred J. Hagger & John R. Madden, 2001. "Competitive Federalism: A Political-Economy General Equilibrium Approach," Economics Discussion / Working Papers 01-10, The University of Western Australia, Department of Economics.
    2. Haughwout, Andrew F., 2002. "Public infrastructure investments, productivity and welfare in fixed geographic areas," Journal of Public Economics, Elsevier, vol. 83(3), pages 405-428, March.
    3. Borck, Rainald & Owings, Stephanie, 2003. "The political economy of intergovernmental grants," Regional Science and Urban Economics, Elsevier, vol. 33(2), pages 139-156, March.
    4. Petchey, Jeffrey & Shapiro, Perry, 2000. "The Efficiency of State Taxes on Mobile Labour Income," The Economic Record, The Economic Society of Australia, vol. 76(234), pages 285-296, September.
    5. Epple, Dennis & Filimon, Radu & Romer, Thomas, 1984. "Equilibrium among local jurisdictions: toward an integrated treatment of voting and residential choice," Journal of Public Economics, Elsevier, vol. 24(3), pages 281-308, August.
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