Computing Economic Equilibria on Affine Networks with Lemke's Algorithm

Abstract

Consider a multicommodity transhipment problem where the prices at each location are an affine function of the supplies and demands at that location and the shipping costs are an affine function of the quantities shipped. A system of prices, supplies, demands, and shipments is defined to be an equilibrium, if there is a balance in the shipments, supplies, and demands of goods at each location, if local prices do not exceed the cost of importing, and if shipments are price efficient. Lemke’s algorithm is used to compute an equilibrium.