Computing equilibria for markets with constant returns production technologies

Research output: Journal Publications and Reviews (RGC: 21, 22, 62)21_Publication in refereed journalpeer-review

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Original languageEnglish
Pages (from-to)269–284
Journal / PublicationAnnals of Operations Research
Issue number1-2
Online published26 Jul 2020
Publication statusPublished - Jun 2021


This paper is concerned with the computation of equilibrium for an exchange economy with constant returns production technologies. We convert such an economy into a pure exchange economy by allocating the production to each consumer’s endowment evenly. In this way, the market clearing condition of the original economy is reformulated as that of a pure exchange economy, together with an additional complementarity condition to ensure the feasibility of production plans. A homotopy method is proposed to solve these two problems simultaneously. With this approach, the economic equilibrium model with constant returns production can be handled in a similar way to the pure exchange economy. A path-following algorithm is then developed for computing equilibria in these economies.

Research Area(s)

  • Constant returns production, Differentiable homotopy, Economic equilibrium, Path-following algorithm