On Computability of Equilibria in Markets with Production

Although production is an integral part of the Arrow-Debreu market model, most of the work in theoretical computer science has so far concentrated on markets without production, i.e., the exchange economy. This paper takes a significant step towards understanding computational aspects of markets with production. We first define the notion of separable, piecewise-linear concave (SPLC) production by analogy with SPLC utility functions. We then obtain a linear complementarity problem (LCP) formulation that captures exactly the set of equilibria for Arrow-Debreu markets with SPLC utilities and SPLC production, and we give a complementary pivot algorithm for finding an equilibrium. This settles a question asked by Eaves in 1975 of extending his complementary pivot algorithm to markets with production. Since this is a path-following algorithm, we obtain a proof of membership of this problem in PPAD, using Todd, 1976. We also obtain an elementary proof of existence of equilibrium (i.e., without using a fixed point theorem), rationality, and oddness of the number of equilibria. We further give a proof of PPAD-hardness for this problem and also for its restriction to markets with linear utilities and SPLC production. Experiments show that our algorithm runs fast on randomly chosen examples, and unlike previous approaches, it does not suffer from issues of numerical instability. Additionally, it is strongly polynomial when the number of goods or the number of agents and firms is constant. This extends the result of Devanur and Kannan (2008) to markets with production. Finally, we show that an LCP-based approach cannot be extended to PLC (non-separable) production, by constructing an example which has only irrational equilibria.Comment: An extended abstract will appear in SODA 201

Network-constrained models of liberalized electricity markets: the devil is in the details

Numerical models for electricity markets are frequently used to inform and support decisions. How robust are the results? Three research groups used the same, realistic data set for generators, demand and transmission network as input for their numerical models. The results coincide when predicting competitive market results. In the strategic case in which large generators can exercise market power, the predicted prices differed significantly. The results are highly sensitive to assumptions about market design, timing of the market and assumptions about constraints on the rationality of generators. Given the same assumptions the results coincide. We provide a checklist for users to understand the implications of different modelling assumptions

Spatial networks in multi-region computable general equilibrium models:

The spatial dimension of economic policy is often important. However, as opposed to partial-equilibrium multi-region programming models, existing multi-region Computable General Equilibrium (CGE) models have rarely explicitly treated geographical space. This paper develops a spatial-network, mixed-complementarity CGE model that combines the strengths of CGE and partial-equilibrium programming models. We implement the model with a prototype data set for a stylized, poor, developing country with rural regions linked to an urban region that provides the gateway to international markets. We demonstrate that the model provides a good framework for analyzing the impact of higher world prices and reduced domestic transportation costs.Equilibrium (Economics), Economic policy., Spatial analysis (Statistics), Computable general equilibrium (CGE).,

MODELLING THE DYNAMICS OF PRODUCTION ADJUSTMENT TO SHORT-TERM MARKET SHOCKS

Models of agricultural economics typically operate at an annual basis or in a static equilibrium framework where inputs, outputs and their prices may change considerably. Production dynamics, however, imply that models relying on spatial and temporal aggregation do not capture the effects of biological constraints in the short run. This paper examines short and long-term impacts of demand and production cost shocks in the pig sector. The analysis is carried out with a dynamic programming model which takes into account changes in export and domestic demand and market clearing price. It optimizes the supply of piglets on a monthly basis. Econometric techniques are used to estimate demand functions. Short-term negative market shocks can already have significant income effects to agricultural producers. We simulated effects of pig meat export bans of different degrees due to livestock epidemics. Full closure of export markets for six months cost pig sector €21 million.pig, demand, dynamic programming, export, livestock epidemics, price, supply, Demand and Price Analysis, Livestock Production/Industries, Production Economics, Risk and Uncertainty,

Improving Indonesia's Forest and Land Governance: Using a Delphi Approach to Identify Efficacious Interventions

It is now recognized that addressing deforestation and forest and peatlands degradation and destruction in Indonesia requires improvements to land and forest governance. It is also accepted that further research is required into this large field of study and practice. In particular needs have been identified for better links between theory and practice, and between academic analysis and work in the field. To respond to this gap, this study investigates the underlying drivers of deforestation, and forest and peatlands degradation and destruction (herein called deforestation and peatlands degradation) with the intention of identifying interventions that will improve land and forest governance in Indonesia. Through a Delphi process, a panel of experts on forest and land governance identified three main drivers of deforestation and peatlands degradation. These were: (1) unclear land tenure and uncertain land classification (agreed by 88% of respondents); (2) business and political interests that influence policy-making and regulations (70% agreement) and (3) ineffective land use planning (53% agreement). In response, the panel recommended three priority governance interventions relating to the following issues: (1) increasing the capacity of local communities to manage and monitor forests and natural resources (65% agreement); (2) gazetting forests to clarify land boundaries and determine which areas should be village, community and state forest zone (58% agreement); (3) integrating participatory maps into spatial plans to protect local communities and indigenous peoples' development needs (53% agreement). A research theme with the highest agreement was the following: action research involving the government, private sector and community (64% agreement). This study finds that there is strong support for community level approaches to forest management. Securing community forest tenure through clarifying land claims and integrating local land tenure into spatial planning is a key step to achieving sustainable forest management. The concluding recommendations suggest that the most efficacious interventions to be taken by researchers, government, donors and civil society to improve Indonesia's forest and land governance processes include: Support community institutions; Accelerate forest gazettement using local community institutions to clarify community forest claims; Integrate participatory maps into spatial plans; Support local communities' ability to monitor forests; Conduct action research involving all stakeholders; Address financing of the forest and land sector; Engage political economy analysis

Mises, Kantorovich and Economic Computation

An article that reviews the work of Kantorovich in the light of von Mises claim that rational calculations were impossible without markets. It gives a tutorial introduction to the use of Kantorovich's methods, compares his approach to that of Dantzig. An assesment is given of the extent to which new interior point methods of linear programming strengthen or weaken Kantorovich's claims.Kantorovich, Linear-programming, von-Mises