The Takayama and Judge Price and Allocation Model and its Application in Non-linear Techniques for Spatial Market Integration

The Takayama and Judge Allocation models serve as the theoretical foundation for spatial market integration analysis, and despite the large number of papers devoted to the topic, still the knowledge and understanding of the economic phenomena is fragile. By generating artificial economic data under an economic framework, it is expected to contribute to a better understanding of the topic and revise if the current econometric (threshold vector error correction models) techniques are suitable for the analysis or not. Following the static and equilibrium nature of the Takayama and Judge models, it was possible to introduce dynamics and disequilibrium in the model to generate artificial data: prices. Such artificial prices were used to get a first insight on how to address further research.