Solving Over-production and Supply-guarantee Problems in Economic Equilibria

The classical Spatial Price Equilibrium of economic markets may result in over-production at supply markets and under-supply at demand markets. This paper considers the policy instruments of levying taxes at supply markets to avoid over-production and granting subsidy for traders to guarantee supply...

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Bibliographic Details
Published in:Networks and spatial economics 2011-03, Vol.11 (1), p.127-138
Main Authors: He, Bing-sheng, Xu, Wei, Yang, Hai, Yuan, Xiao-Ming
Format: Article
Language:English
Subjects:
Algorithms
Civil Engineering
Commodities
Demand
Direct method
Economic theory
Economics
Economics and Finance
Equilibrium
Implicit complementarity problem
Marketing
Markets
Mathematical analysis
Mathematical models
Networks
Operations Research/Decision Theory
Over-production
Prices
Regional/Spatial Science
Shipments
Spatial price equilibrium
Studies
Subsidies
Supply & demand
Supply-guarantee
Taxes
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Summary:The classical Spatial Price Equilibrium of economic markets may result in over-production at supply markets and under-supply at demand markets. This paper considers the policy instruments of levying taxes at supply markets to avoid over-production and granting subsidy for traders to guarantee supply at demand markets. The decision process of determining appropriate rates of tax and subsidy is characterized by an implicit complementarity problem. Consequently, a direct type algorithm is applied to solve the complementarity model. Preliminary numerical results are also reported.
ISSN:1566-113X
1572-9427
DOI:10.1007/s11067-008-9095-2