Spatial Nonconvexities

Modern economic theory has experienced a persistent shift away from partial equilibrium modelling and towards the theory of general competitive equilibrium. Spatial economic analysis, however, has by and large remained rooted in the older approach. This conservatism may be explained in part by the stringently aspatial manner in which general equilibrium theory is conventionally expressed. This paper attempts to redress this imbalance by considering general equilibrium in an explicitly geographic setting. In this particular context, space manifests itself primarily through transportation costs, and the major concern is to ascertain the pattern of transportation costs which the axioms of general equilibrium theory imply.