A dynamic disequilibrium interregional commodity flow model

We are concerned in this paper with creating a dynamic description of interregional commodity movements which has steady states consistent with the traditional Samuelson-Takayama-Judge (STJ) static spatial price equilibrium model. This is accomplished by introducing a disequilibrium adjustment mechanism which differs from that of other network spatial price tatonnement models in that prices and interregional flows follow distinct signals, and constraints ensuring balanced trade flows are not enforced prior to attaining an equilibrium. The disequilibria arising from our relaxation of the flow balance constraints are seen to provide a foundation for describing failures of spatial markets to clear. Also notable among the features of our model is its treatment of a general network topology and non-separable cost, supply and demand functions. We show through numerical experiments that the proposed adjustment process is seen to hold promise as means of calculating static spatial price equilibria. Furthermore, we discuss the circumstances under which disequilibrium states visited by the adjustment process describe actual time-varying commodity flows and prices, allowing the model to be used for predictive dynamic interregional freight modeling.