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On Modeling Transport Costs

Author

Listed:
  • José M. Usategui
  • Xavier Martínez-Giralt

Abstract

The interpretation of the loss of utility as transport costs in address models of differentiation poses a methodological difficulty. Transport costs implicitly amounts to assume that there is a good neither included in the differentiated sector nor in the composite (numeraire) good of the economy. We propose to use iceberg-type transport costs to solve this difficulty.

Suggested Citation

  • José M. Usategui & Xavier Martínez-Giralt, 2015. "On Modeling Transport Costs," Working Papers 277, Barcelona School of Economics.
    • Handle: RePEc:bge:wpaper:277
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    References listed on IDEAS

    as
    1. Samuelson, Paul A, 1983. "Thunen at Two Hundred," Journal of Economic Literature, American Economic Association, vol. 21(4), pages 1468-1488, December.
    2. Krugman, Paul, 1991. "Increasing Returns and Economic Geography," Journal of Political Economy, University of Chicago Press, vol. 99(3), pages 483-499, June.
    3. Abdel-Rahman, Hesham M., 1994. "Economies of scope in intermediate goods and a system of cities," Regional Science and Urban Economics, Elsevier, vol. 24(4), pages 497-524, August.
    4. Paul Krugman, 1992. "A Dynamic Spatial Model," NBER Working Papers 4219, National Bureau of Economic Research, Inc.
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    Keywords

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    JEL classification:

    • L12 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Monopoly; Monopolization Strategies
    • D42 - Microeconomics - - Market Structure, Pricing, and Design - - - Monopoly

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