Equilibrium and Linear Complementarity — An Economy with Institutional Constraints on Prices
In the theory of perfect competition, it is supposed that there are no institutional restrictions upon prices. Much the same assumption is built into mathematical programming models. The presence of such constraints implies, for example, that the market price and the marginal productivity (shadow price) of the factors of production will not necessarily coincide. Unless such constraints are introduced, models cannot explain the simultaneous existence of excess supply of an item and yet a positive market price.
KeywordsMarket Price Linear Complementarity Problem Shadow Price Excess Supply Institutional Constraint
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- Hansen, Terje and Mathiesen, Lars, ‘Generating Stationary Points for a Non-Concave Quadratic Program by Lenke’s almost Complementary Pivot Algorithm’, Discussion Papers 11/73, Norwegian School of Economics and Business Administration, 5000 Bergen, Norway.Google Scholar