Author: Peter B. Dixon
The mathematical programming approach to applied general equilibrium analysis, although no longer the dominant tool, is still useful, from at least two points of view:
(1) it neatly integrates into an economy-wide framework the microeconomic theory of the behaviour of agents constrained by inequalities; and
(2) it provides a useful approach for computing the solutions of some general equilibrium problems not solvable with the current GEMPACK software (see, e.g., Dixon (1991), cited below on p. 16).
The material contained in this paper was meant to be included in our graduate-level text (Peter B. DIXON, B.R. PARMENTER, Alan A. POWELL and P.J. WILCOXEN, Notes and Problems in Applied General Equilibrium Economics (Amsterdam: North-Holland, 1992), but space limitations led to our reluctant exclusion of it from the text. Publication in the Impact series will mean that those who find the approach in our textbook useful will be able to apply the same method towards mastering mathematical programming in a general equilibrium context.
JEL classification: C68, C61
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