Q2 Z2,(Q2) Z2(Q2) - Institute for Water Resources - U.S. Army

interesting expressions. However, there would not be much difficulty in
'using it in a concrete case.
4. Summary and Conclusion.
In the spatial competition model presented at the beginning
of this chapter there were two places where a homogeneous commodity was
produced under conditions of perfect competition and constant costs of
-production. Therefore, the prices of this commodity at the places of
production equal the average cost of production and are constant regardless
of the quantity produced. It followed that the delivered price of one
unit of commodity from either center of production was equal to the
relevant cost of production plus the cost of transportation. There was only
one mode of transportation in this very simple model. The commodity being
homogeneous, the buyers were choosing to buy from the center of production
with the lowest delivered price. The boundary of the two production centers'
respective markets was given by the locus of the points where the deliveries
were equal and the buyers indifferent as to the origin. The amount sold at
each point could be determined by the demand curve particular to each buying
point confronted with the lowest delivered price as shown in diagram 13.
But this determination goes beyond the problem of market boundaries.
In the transportation analog, the homogeneous "good" offered to
the farmers was a very special one: 'to have a ton of grain at the market
place'. The price of this "good" was zero and constant at the market place
itself so that its delivered price anywhere in the space was equal to its
transportation cost. Two means of transportation Were available: the road
(or the rail) using a direct route to the marketplace, and a combination of
; modes, road-water, through an indirect route. Again, the buyers or farmers
I were choosing the cheapest way, and boundaries could be derived as the locus
of the points where, costs being equal, the farmers were indifferent. At
first it was assumed that the transportation services offered by the two
routes were identical, and that only their rates, or direct money outlays,
were unequal. Then time and service differences were introduced and
translated into additional costs for the shippers, under the assumption that
they were moneywise maximizing. In some cases, the solution for the boundary
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