Introducing Armington imperfect substitutability into Samuelson’s spatial price equilibrium model. The case of the French Forest Sector Model

The French Forest Sector Model (FFSM) combines a spatial price equilibrium model à la Samuelson and an imperfect substitution assumption à la Armington for wood products between France and the Rest of the World. This paper aims at proving the existence and the conditions of equilibrium in FFSM. In particular, we show that, at equilibrium, (1) introducing Armington’s imperfect substitutability does not change Samuelson’s equilibrium conditions and that, (2) processing-industries make a positive profit if and only if they reach their production capacity limit.