Postprint version. Published in Annals of Operations Research, Volume 68, Issue 2, June 1, 1996, pages 281-300. Copyright © 1996 Springer. The original publication is available at http://dx.doi.org/10.1007/BF02209616.
NOTE: At the time of publication, the author Charles F. Nicholson was not yet affiliated with Cal Poly.
In this paper, we develop a perfectly competitive spatial equilibrium model in price and quantity variables in the presence of discriminatory ad valorem tariffs, a widely used trade policy instrument. We derive the equilibrium conditions and formulate them as a variational inequality problem. An algorithm is then proposed for the computation of the equilibrium pattern and convergence results established. The algorithm resolves the problem into very simple subproblems, each of which can be solved simultaneously and in closed form. Finally, the algorithm is implemented on the massively parallel Thinking Machines CM-2 and CM-5 architectures, known as the Connection Machines, and numerical results presented.
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