Computing Economic Equilibria by a Homotopy Method

TL;DR

This paper explores a homotopy method for computing economic equilibria in pure exchange and production economies, demonstrating its effectiveness through numerical tests on known models.

Contribution

It introduces a homotopy algorithm for equilibrium computation and evaluates its performance on established economic models.

Findings

The homotopy method successfully computes equilibria in tested models.

Numerical results show the algorithm's efficiency and accuracy.

The approach is applicable to economies defined by excess demand functions.

Abstract

In this paper the possibility of computing equilibrium in pure exchange and production economies by a homotopy method is investigated. The performance of the algorithm is tested on examples with known equilibria taken from the literature on general equilibrium models and numerical results are presented. In computing equilibria, economy will be specified by excess demand function.