An Effective Decomposition Procedure for Computing Equilibrium Single Commodity Trade Flows

Abstract

The objective is to compute equilibrium interregional trade flows in relation to approximately linear supply and demand curves for a single commodity. There are n regions on a network characterized by approximately linear interregional transportation costs. Quadratic programming approaches can be greatly simplified by exploiting the special structure of the problem. This paper shows how the reduced quadratic program can then be partitioned using Benders decomposition. The computation then involves solving relatively small transportation problems and quadratic programming problems. Numerical experiments show the method to be effective in reducing computational requirements.