Computational economics

Market equilibrium computation

Market equilibrium computation (also called competitive equilibrium computation or clearing-prices computation) is a computational problem in the intersection of economics and computer science. The input to this problem is a market, consisting of a set of resources and a set of agents. There are various kinds of markets, such as Fisher market and Arrow–Debreu market, with divisible or indivisible resources. The required output is a competitive equilibrium, consisting of a price-vector (a price for each resource), and an allocation (a resource-bundle for each agent), such that each agent gets the best bundle possible (for him) given the budget, and the market clears (all resources are allocated). Market equilibrium computation is interesting due to the fact that a competitive equilibrium is always Pareto efficient. The special case of a Fisher market, in which all buyers have equal incomes, is particularly interesting, since in this setting a competitive equilibrium is also envy-free. Therefore, market equilibrium computation is a way to find an allocation which is both fair and efficient. (Wikipedia).

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Related pages

Karush–Kuhn–Tucker conditions | Constant elasticity of substitution | Competitive equilibrium | Linear function | Efficient envy-free division | Geometric mean | Pareto efficiency | Arrow–Debreu model | Hyperplane | Efficient approximately-fair item allocation | Computational problem | Homogeneous function | Maximum flow problem | Lemke–Howson algorithm | Concave function | Convex optimization | Piecewise linear function | Semialgebraic set | Flow network | Envy-freeness | Fisher market