Lincoln College. Agricultural and Economics Research Unit.
Abstract
Recent advances in mathematical programming techniques have
made it possible to provide more realistic solutions to applied
economic problems. Although mathematical programming techniques are
widely used, the economic content of the solutions is often limited by
the assumptions imposed by the algorithms available. This report is
designed to demonstrate the increased flexibility which is currently
available for the solution of a wide range of spatial economic
problems.
Transportation and transhipment models have been widely used in
the analysis of the impact of policy changes on spatial activity,
Borrell & Zwart [l]; Beck, Rathbun and Abbott [2]. One of the major
shortcomings of such models has been an inability to model the impact
of more flexible pricing policies on regional supply and demand, while
maintaining the realistic non linearities which are associated with
processing and transportation costs. In this paper a simplified
version of the transhipment model developed by Borrell & Zwart [l] is
modified to incorporate regional supply response while at the same time
retaining complex processing and handling cost relationships.
This report outlines the general form of the spatial
equilibrium problem and some of the solution techniques available, in a
format easily understood by readers not conversant with operational
research techniques. Initially the problem is defined and solution
methods used in the past are then briefly described. The advantages
and disadvantages of these methods are outlined before showing how a
relatively new solution technique may be able to improve both the scope
and flexibility of the problems being solved
