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A New Demand-Supply Decomposition Method for a Class of Economic Equilibrium Models

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  • W. Chung
  • J. Fuller
  • Y. Wu

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. Copyright Kluwer Academic Publishers 2003

Suggested Citation

  • W. Chung & J. Fuller & Y. Wu, 2003. "A New Demand-Supply Decomposition Method for a Class of Economic Equilibrium Models," Computational Economics, Springer;Society for Computational Economics, vol. 21(3), pages 231-243, June.
    • Handle: RePEc:kap:compec:v:21:y:2003:i:3:p:231-243
    DOI: 10.1023/A:1023995710308
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    References listed on IDEAS

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