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Published in:
2005 | OriginalPaper | Chapter
Exchange Market Equilibria with Leontief’s Utility: Freedom of Pricing Leads to Rationality
Author : Yinyu Ye
Published in: Internet and Network Economics
Publisher: Springer Berlin Heidelberg
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This paper studies the equilibrium property and algorithmic complexity of the exchange market equilibrium problem with more general utility functions: piece-wise linear functions, which include Leontief’s utility functions. We show that the Fisher model again reduces to the general analytic center problem, and the same linear programming complexity bound applies to approximating its equilibrium. However, the story for the Arrow-Debreu model with Leontief’s utility becomes quite different. We show that, for the first time, that solving this class of Leontief exchange economies is equivalent to solving a known linear complementarity problem whose algorithmic complexity status remains open.