Chapter 5 Spatial equilibrium analysis

This chapter presents a spatial equilibrium analysis study. It briefly and selectively reviews modeling efforts in the spatial programming modeling areas. The chapter introduces recent developments made in linear complementarity programming (LCP) modeling, including a world-wide bauxite-alumina-aluminum industry investment analysis model and a regional coal and gas demand-supply allocation model. It was pointed out by Takayama that the quadratic programming model (because of the existence of substitution-complementarity relationships in demand functions and supply functions in the model) takes exactly the form of the LCP model, thus, allowing researchers to formulate this model in the LCP format. The LCP formulation has a wider coverage in application than its quadratic programming (QP) counterparts. Possibilities for future research can be divided into two areas. The first area is the theoretical investigation of existence, uniqueness, and stability of optimal investment patterns (and capital earnings streams), leading, for example, towards the (infinite time horizon) time invariant optimal investment profile. The second area constitutes a further application of this model formulation to investigate policy effectiveness of spatial commodity models in a national and an international context.