A Spatial Price Equilibrium Model of International Trade

Abstract

An interregional equilibrium model developed by Takayama and Judge is reformulated to represent international trading. Their model, a spatial, partial equilibrium formulation, allows for interaction among both countries and commodities under the assumptions of free trade and a perfectly competitive market. In the present article, this basic competitive model is extended to incorporate some common trade and domestic policies which alter the free trade assumption. The usefulness of such a model for trade policy analysis is demonstrated by means of hypothetical data. Spatial models of this type, in which commodities are interrelated in both demand and supply, are shown to have considerable potential for empirical research in the field of international trade.

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