A spatial price equilibrium model with congestion effects

This paper examines the commodity price equilibrium problem in a spatially extended market. The earlier continuous equilibrium modeling approach is extended by explicitly taking into account congestion effects. An optimization model with a flow-dependent transportation cost function is proposed and its dual formulation in terms of a potential function is derived. The complementarity conditions between the primal and dual problems are shown to be equivalent to the spatial price equilibrium conditions with congestion effects.