Implementing Alternative Pricing Policies in Economic Equilibrium Models Using the Extended Mathematical Programming Framework
Abdullah Al Jarboua,
Frederic Murphy and
Axel Pierru ()
Methodology Papers from King Abdullah Petroleum Studies and Research Center
Standard economic optimization models represent markets in perfect competition. They are commonly used, though they may not accurately represent real-world policies and regulations. Equilibrium models built using a mixed complementarity problem (MCP) approach are capable of simulating more flexible pricing structures, including regulated prices. This approach can provide a more accurate representation of real-world economic systems. However, it is significantly more difficult to develop and requires more complex formulations, as well as advanced skill sets.
Pages: 31 pages
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