Non-uniform and non-constant transaction costs as determinants of dispersed agricultural trade flows

In a 1952 article, Samuelson developed the theory that the problem of price relations between two spatially separated markets, described by him as a ‘purely descriptive problem in non-normative economics’, can be formulated as an optimization problem and be related to the Koopmans (1949) Hitchcock (1941) minimum-transport-cost problem. We refer to this theory throughout the manuscript as the spatial price equilibrium (SPE) theory. The corresponding Enke – Samuelson – Takayama – Judge (ESTJ, Enke 1951; Samuelson 1952; Takayama and Judge 1964) SPE model has been widely applied in the past by agricultural economists for ex-ante analysis of agricultural trade policies. Some recent examples include (Abbassi et al. 2008; Anania 2006; Butt and McCarl 2005; Djunaidi and Djunaidi 2007; Helming and Reinhard 2009; Nolte et al. 2010; Sobolevsky et al. 2005; Weaver 2009; Wilson et al. 2008). In its most basic shape, it is a recursive combination of demand and supply models of various regions and a cost minimizing transport model between these regions. The transport module being normative and usually linear