A New Demand-Supply Decomposition Method for a Class of Economic Equilibrium Models |
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| Authors: | W. Chung J. D. Fuller Y. June Wu |
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| Affiliation: | (1) Department of Management Sciences, City University of Hong Kong, Kowloon Tong, Kowloon, Hong Kong;(2) Department of Management Sciences, University of Waterloo, Waterloo, Ontario, Canada, N2L 3G1;(3) Department of Mechanical Engineering, Ryerson Polytechnic University, Toronto, Ontario, Canada, M5B 2K3 |
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| Abstract: | Development and management of a large scale equilibrium model can be much moreefficient if it is broken into its natural, almost independent parts, whichare brought together only when a global solution is desired. We present a newdecomposition algorithm, for non-optimization models of equilibrium, whichintegrate a price-dependent demand component with a linear programming supplycomponent. This method allows for further decomposition of the supply side,e.g., by region or commodity. Existing demand-supply decomposition methods foreconomic equilibrium models, based on the cobweb algorithm, may fail toconverge. Our new demand-supply decomposition method based on theDantzig–Wolfe decomposition principle, converges in a finite number ofiterations. We demonstrate the algorithm with a model of Canadian energysupplies and demands. |
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| Keywords: | decomposition methods computable equilibrium |
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