SPATIAL PRICE EQUILIBRIUM IN INTERDEPENDENT MARKETS - PRICE AND SALESCONFIGURATIONS

Sheppard et al (1992) introduced a spatial interdependent markets mode l for a single commodity and derived existence and stability propertie s of sales and prices at equilibrium under two price adjustment mechan isms and two profit-seeking scenarios. This paper explores the spatial properties of the sales and price configurations. Equilibrium prices are given two interpretations that relate to two different aspects of inter-market consumer flows for the purpose of purchasing the commodit y. Subsequently the paper describes how sales and prices can be separa ted into an element reflecting locational advantage which arises from the overlapping of juxtaposed consumer choice sets of different sizes and an element reflecting market interaction which arises because of c onsumer sensitivity to price differences between sites within their ch oice set. Configurations of sales and prices are generated explicitly for certain spatial systems. The two profit objectives lead to strikin gly different spatial price distributions. Equilibrium prices and sale s under both profit objectives appear to be quite closely tied to the prices and sales that are generated by the choice set structure (locat ional advantage) after smoothing by a local scale spatial operator. Th e relationships between prices and sales due to locational advantage a nd prices and sales at equilibrium are analyzed.