Inefficiency of Spatial Prices Using the Thermodynamic Formalism

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Abstract
A set of relationships is provided between an existing map of prices and flows of a commodity and that map which would occur under the assumptions of competitive spatial price-equilibrium. The primary concepts developed are areal (configurational) entropy of prices, general level of intensity of exploitation of opportunities, and the equilibrium prices set by a linear programming solution of an interregional commodity-distribution problem. Secondary concepts are the inefficiencies of flows and of prices due to insufficient exploitation of opportunities and due to ‘wrong’ pricing (or transaction costs). The value of information is discussed and an application made to the contribution of externalities to land rent.

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