1238 PONTIFICIAE ACADEMIAE SCIENTIARVM SCRIPTA VARIA -
8. Transportation problems may play a crucial role for
some national (and some international) products of a relatively
heavy nature (agricultural and mining products). Here the
interplay between location and costs at other locations may
have to be brought in. For these products the sub-division
of the economy into regions implies that we introduce prices
for the same product in different regions or even that we distinguish
between alternative regions of origin for one product.
The latter assumption may mean that we have, in each region,
a set of price notations for the same good with different origin
and at the same time implies the assumption of quality differences
and imperfect markets. The latter approach, though seemingly
more complicated, may actually be simpler since it permits
us to assume a finite elasticity of substitution between
products of different origin. It also permits the assumption
that the price of a good outside its region of production equals
its production cost in its region plus transportation costs to the
region of destination.
The alternative assumption of a uniform price in each region
for each product implies the use of inequalities among the
restrictions, usually mathematically more cumbersome to
handle.
9. For the type of commodities just discussed a key must
be used for the distribution, by the buyers, of total needs over
the conceivable regions of origin. These needs, to be indicated
as disappearance, equal the sum total of final demand in the
region (consumption plus investment), possible exports to foreign
countries and inputs used in the region by other sectors.
This disappearance itself originates from production within the
region and imports from other regions (including, possibly, foreign
countries). In loose terms, it will be bought wherever it
is cheapest, taking into account transportation. More accuracely
the key of distribution must be formalized and two alternative
keys have been discussed elsewhere [1]. The remarks
‘181 Tinbergen - pag. 6
