Thursday, 13:45 - 14:10 h, Room: H 3027

 

Xiaoxuan Meng
An interior-point path-following method for computing equilibria of an exchange economy with linear production technologies

Coauthor: Chuangyin Dang

 

Abstract:
The computation of economic equilibria plays an important role in all applications of general economic equilibrium model.
Despite the fact that some numerical methods have been proposed, how to compute economic equilibria efficiently remains a challenging issue. In this paper, we develop an interior-point path-following method for computing economic equilibria of an exchange economy with linear production technologies. The peculiar characteristic of our method is that we convert an exchange economy with linear production technologies to a pure exchange economy by ways of allocating the production to consumers' endowments evenly. Resorting to an extra variable, we devise a new economy which deforms from a trivial exchange economy to the original one while the variable varies from 0 to 1. An application of Sard's theorem and perturbations leads to the existence of a smooth interior-point path, which starts from the unique equilibrium of the exchange economy and leads to an economic equilibrium of the exchange economy with linear production technologies. A predictor-corrector method is proposed to numerically follow the path. Efficiency of the method is demonstrated through numerical examples.

 

Talk 2 of the invited session Thu.2.H 3027
"Optimization and economic applications" [...]
Cluster 7
"Finance & economics" [...]

 

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