A New Decomposition Method for Multiregional Economic Equilibrium Models

William Chung (), J. D. Fuller () and Y. June Wu ()
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William Chung: Department of Management Sciences, City University of Hong Kong, Kowloon Tong, Hong Kong, China
J. D. Fuller: Department of Management Sciences, University of Waterloo, Waterloo, Ontario, Canada N2L 3G1
Y. June Wu: Department of Mechanical and Industrial Engineering, Ryerson University, Toronto, Ontario, Canada M5B 2K3

Operations Research, 2006, vol. 54, issue 4, 643-655

Abstract: This paper discusses decomposition of a multiregional economic equilibrium model that is characterized by a cost minimizing, linear programming (LP) model of the supply side and a vector-valued function that gives demand prices as functions of the quantities demanded. Our motivation is to ease model development and maintenance by a solution method that links separately developed regional models only when a consistent multiregion solution is desired. A heuristic strategy is described to extend any existing (LP) decomposition principle to a procedure for decomposing an equilibrium model by region. This strategy is applied to extend Dantzig-Wolfe decomposition to the multiregional economic equilibrium model, and several theoretical results are derived for the resulting algorithm. The central result is a proof of asymptotic convergence, under usefully general conditions. The extended Dantzig-Wolfe procedure is illustrated with an existing, two-region model of Canadian energy supplies and demands.

Keywords: natural resources; energy: multiregional economic equilibrium models; programming: decomposition; variational inequalities (search for similar items in EconPapers)
Date: 2006
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Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:inm:oropre:v:54:y:2006:i:4:p:643-655

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