Advances in Management and Applied Economics

The Spatial Equilibrium Monopoly Models of the Steamcoal Market

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  • Abstract

    This paper replicates two spatial monopoly models by Takayama and Judge. The first one is a simple spatial monopoly model. The second model allows the activity of arbitrage between any pains of consumption regions if the price differential exceeds the corresponding unit transportation cost. With the additional constraints, the profit level must decrease unless the constraints are all redundant. The simulation of the Appalachian steamcoal market indicates that both models perform poorly either in terms of flow variables or in the case of consumption and production levels. This implies that the steamcoal market in our model is far from being either of the spatial monopoly models. The Appalachian steamcoal market, characterized by numerous coal mines as well as utility companies, simply cannot be modeled by the spatial monopoly models.