ABSTRACT
In his paper on spatial competition, Hotelling (1929) opened the way to the development of imperfect competition and spatial price discrimination theories. Later on, Hoover (1948) and Isard (1956) advanced spatial price analysis in their classic theoretical works on location and space-economy. Subsequently, the process of spatial price arbitrage was formalized as equilibrium among more than two markets by Enke (1951) and Samuelson (1952). Spatial price relations also are the subject of international trade theory. In developing the Heckscher-Ohlin principle, Samuelson formulated the factor price equalization theorem, which states that unless initial factor endowments are too unequal, commodity mobility will always be a perfect substitute for factor mobility (Samuelson, 1948, 1949). In
other words, an increased level of market integration for basic commodities is an essential condition for achieving free mobility of factors of production. Since then, there have been a number of attempts to model the impact of variables such as distance, location and transport cost on markets and flows (Roehner, 1996; Baulch, 1997a; Fafchamps, 1996).
