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Computing Market Equilibria with Price Regulations Using Mathematical Programming

Author

Listed:
  • Harvey J. Greenberg

    (University of Colorado, Denver, Colorado)

  • Frederic H. Murphy

    (Temple University, Philadelphia, Pennsylvania)

Abstract

One approach to modeling and solving for economic equilibria relies on mathematical programming. These models solve for competitive equilibria. However, policy analysis often requires measuring the impacts of government price regulations that differ from the competitive equilibrium. In this paper we provide a unified framework for computing market equilibrium in mathematical programming models in the presence of government price regulations. The iterative procedure that we use is essentially a Gauss–Seidel algorithmic strategy. The paper concludes by showing how to represent tax/rebate programs, average-cost pricing, and price ceilings.

Suggested Citation

  • Harvey J. Greenberg & Frederic H. Murphy, 1985. "Computing Market Equilibria with Price Regulations Using Mathematical Programming," Operations Research, INFORMS, vol. 33(5), pages 935-954, October.
    • Handle: RePEc:inm:oropre:v:33:y:1985:i:5:p:935-954
    DOI: 10.1287/opre.33.5.935
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    Citations

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    Cited by:

    1. Bertrand Rioux & Philipp Galkin & Frederic Murphy & Axel Pierru, 2017. "How do Price Caps in China’s Electricity Sector Impact the Economics of Coal, Power and Wind? Potential Gains from Reforms," The Energy Journal, , vol. 38(1_suppl), pages 63-76, June.
    2. Han, Lei, 2009. "Market acceptance of cloud computing: An analysis of market structure, price models and service requirements," Bayreuth Reports on Information Systems Management 42, University of Bayreuth, Chair of Information Systems Management.
    3. Xu, Qingyu & Hobbs, Benjamin F., 2021. "Economic efficiency of alternative border carbon adjustment schemes: A case study of California Carbon Pricing and the Western North American power market," Energy Policy, Elsevier, vol. 156(C).
    4. Oggioni, Giorgia & Smeers, Yves, 2012. "Evaluating the application of different pricing regimes and low carbon investments in the European electricity market," Energy Economics, Elsevier, vol. 34(5), pages 1356-1369.
    5. Gabriel, Steven A. & Vikas, Shree & Ribar, David M., 2000. "Measuring the influence of Canadian carbon stabilization programs on natural gas exports to the United States via a 'bottom-up' intertemporal spatial price equilibrium model," Energy Economics, Elsevier, vol. 22(5), pages 497-525, October.
    6. René Caldentey & Susana Mondschein, 2003. "Policy Model for Pollution Control in the Copper Industry, Including a Model for the Sulfuric Acid Market," Operations Research, INFORMS, vol. 51(1), pages 1-16, February.
    7. Xu, Q. & Hobbs, B., 2020. "Economic Efficiency of Alternative Border Carbon Adjustment Schemes: A Case Study of California Carbon Pricing and the Western North American Power Market," Cambridge Working Papers in Economics 20109, Faculty of Economics, University of Cambridge.
    8. Muñoz, Juan C. & Sauma, Enzo & Muñoz, Francisco D. & Moreno, Rodrigo, 2023. "Analysis of generation investments under price controls in cross-border trade of electricity," Energy Economics, Elsevier, vol. 123(C).
    9. Lavigne, Denis & Loulou, Richard & Savard, Gilles, 2000. "Pure competition, regulated and Stackelberg equilibria: Application to the energy system of Quebec," European Journal of Operational Research, Elsevier, vol. 125(1), pages 1-17, August.
    10. Frederic Murphy & Axel Pierru & Yves Smeers, 2016. "A Tutorial on Building Policy Models as Mixed-Complementarity Problems," Interfaces, INFORMS, vol. 46(6), pages 465-481, December.
    11. Jägemann, Cosima & Hagspiel, Simeon & Lindenberger, Dietmar, 2013. "The Economic Inefficiency of Grid Parity: The Case of German Photovoltaics," EWI Working Papers 2013-19, Energiewirtschaftliches Institut an der Universitaet zu Koeln (EWI).

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