ECONOMIC DISEQUILIBRIUM BY MATHEMATICAL-PROGRAMMING

This paper outlines the general principles of constructing mathematical programming models of the market formation for one or several goods in the presence of rigid prices. For the purpose of exposition, it is assumed that each good may be traded internationally and that the domestic price of the good is bounded from above by its import price and from below by its export price. In principle, however, any other institutional factor causing prices to be rigid can be dealt with in a similar manner. The Lagrange multiplier of the market balance of the good can be interpreted as its market price. From a mathematical point of view, one is confronted with a class of mathematical programming problems where a priori upper a nd lower bounds have been imposed upon the Lagrange multipliers.