On the polynomial time computation of equilibria for certain exchange economies

The problem of computing equilibria for exchange economies has recently started to receive a great deal of attention in the theoretical computer science community. It has been shown that equilibria can be computed in polynomial time in various special cases, the most important of which are when traders have linear, Cobb-Douglas, or a range of CES utility functions. These important special cases are instances when the market satisfies a property called weak gross substitutability. Classical results in economics, which theoretical computer scientists (including us) appear to have been hitherto unaware of, show that the equilibrium prices in such markets are characterized by an infinite number of linear inequalities and therefore form a convex set. In this paper, we show that under fairly general assumptions, there are polynomial-time algorithms to compute equilibria in such markets. To the best of our knowledge, these are the first polynomial-time algorithms for exchange markets under the general setting of weak gross substitutability. To show this result, we need to build on the proofs that characterize the equilibria as a convex set.As a consequence, we obtain alternative polynomial-time algorithms for computing equilibria with linear, Cobb-Douglas, a range of CES, as well as certain other non-homogeneous utility functions that satisfy weak gross substitutability. Unlike previous polynomial-time algorithms, our approach does not make use of the specific form of these utility functions and is in this sense more general. We expect our framework to work or be readily adaptable to handle other exchange markets, provided that the utility functions satisfy weak gross substitutability.

[1]  H. Sonnenschein Do Walras' identity and continuity characterize the class of community excess demand functions? , 1973 .

[2]  J. G. Pierce,et al.  Geometric Algorithms and Combinatorial Optimization , 2016 .

[3]  E. Eisenberg,et al.  CONSENSUS OF SUBJECTIVE PROBABILITIES: THE PARI-MUTUEL METHOD, , 1959 .

[4]  Nikhil R. Devanur The spending constraint model for market equilibrium: algorithmic, existence and uniqueness results , 2004, STOC '04.

[5]  Hugo Sonnenschein,et al.  Market Excess Demand Functions , 1972 .

[6]  G. Debreu,et al.  Excess demand functions , 1974 .

[7]  Bruno Codenotti,et al.  Efficient Computation of Equilibrium Prices for Markets with Leontief Utilities , 2004, ICALP.

[8]  D. Newman,et al.  Complexity of circumscribed and inscribed ellipsoid methods for solving equilibrium economical models , 1992 .

[9]  V. Polterovich,et al.  Gross substitutability of point-to-set correspondences , 1983 .

[10]  Kamal Jain,et al.  A Polynomial Time Algorithm for Computing the Arrow-Debreu Market Equilibrium for Linear Utilities , 2004, FOCS.

[11]  R. Maxfield General equilibrium and the theory of directed graphs , 1997 .

[12]  Rahul Garg,et al.  Auction algorithms for market equilibrium , 2004, STOC '04.

[13]  A. Kirman,et al.  Market Excess Demand in Exchange Economies with Identical Preferences and Collinear Endowments , 1986 .

[14]  B. Eaves Finite solution of pure trade markets with Cobb-Douglas utilities , 1985 .

[15]  Vijay V. Vazirani,et al.  An Auction-Based Market Equilibrium Algorithm for the Separable Gross Substitutability Case , 2004, APPROX-RANDOM.

[16]  E. Eisenberg Aggregation of Utility Functions , 1961 .

[17]  M. Primak A converging algorithm for a linear exchange model , 1993 .

[18]  A. Smithies The Stability of Competitive Equilibrium , 1942 .

[19]  L. Hurwicz,et al.  SOME REMARKS ON THE EQUILIBRIA OF ECONOMIC SYSTEMS , 1960 .

[20]  K. Arrow,et al.  EXISTENCE OF AN EQUILIBRIUM FOR A COMPETITIVE ECONOMY , 1954 .

[21]  V. Polterovich Economic Equilibrium and the Optimum , 1973 .

[22]  L. Hurwicz,et al.  COMPETITIVE STABILITY UNDER WEAK GROSS SUBSTITUTABILITY: THE EUCLIDEAN DISTANCE APPROACH , 1960 .

[23]  R. Mantel On the characterization of aggregate excess demand , 1974 .

[24]  J. Chipman Homothetic preferences and aggregation , 1974 .

[25]  L. Hurwicz,et al.  ON THE STABILITY OF THE COMPETITIVE EQUILIBRIUM, I1 , 1958 .

[26]  Nikhil R. Devanur,et al.  Market equilibrium via a primal-dual-type algorithm , 2002, The 43rd Annual IEEE Symposium on Foundations of Computer Science, 2002. Proceedings..

[27]  Steven Vajda,et al.  The Theory of Linear Economic Models , 1960 .

[28]  Amin Saberi,et al.  Approximating Market Equilibria , 2003, RANDOM-APPROX.

[29]  G. Debreu NEW CONCEPTS AND TECHNIQUES FOR EQUILIBRIUM ANALYSIS , 1962 .