General Spatial Price Equilibrium

In 1952, Samuelson (1952) showed how the problem of determining the flows of a commodity moving between spatially separated points in an equilibrium when transportation costs were positive could be treated as an extremum problem. Samuelson's approach was to maximize gross economic rent net of transportation costs in the system. The earliest use of his procedure of maximizing economic rent for characterizing equilibria is that of Cournot, and Cournot dealt with the identical problem. In this paper, the author will utilize the Cournot-Samuelson approach to characterize an equilibrium in Mosak's general equilibrium trade model for the case when transportation costs between countries are positive and the production of transportation goods is endogenous to the system.