A DECOMPOSITION APPROACH FOR A CLASS OF ECONOMIC EQUILIBRIUM-MODELS

In this paper we present the theoretical foundations for one of the me thods used to achieve convergence in the National Energy Modeling Syst em (NEMS). NEMS is a large model with several component models that ar e built and operated by different branches in the organization and is an example of a system without a hierarchical structure that cannot be solved by traditional equation solving methods. Some of the component models use linear programs to construct supply and demand curves. The discontinuities that result lead to oscillations in the standard rela xation algorithms. We explain where the convergence problems lie and h ow the convergence theory with step functions links to the convergence theory with continuous functions. To achieve convergence within the e ntire system, a set of ad hoc techniques were developed to implement a decomposition strategy that allows the individual models to be run se parately. We present the theoretical justification for one of them her e. The technique presented here has the potential to allow an organiza tion to use operational models for planning without resorting to aggre gation. It also facilitates decentralized computing over Internet.