On extending the negishi approach to computing equilibria: The case of government price support policies

Abstract

The theoretical foundation for the use of mathematical programming models in general equilibrium is a theorem of Negishi, establishing the equivalence between the Arrow-Debreu equilibrium problem and a specific mathematical program. This equivalence offers an alternative to traditional fixed point methods for computing equilibria, which is especially attractive when the number of consumers is small relative to the number of commodities. In this note, we show that the above equivalence extends to economies in which a government enforces real price rigidities through market operations financed by lump-sum taxes.