Abstract
This paper describes the relationship between market prices and shadow prices when the economy has general types of institutional price constraints. We consider a decentralized linear economy where market prices quide the decentralized behavior of each activity and the shadow prices measure the social values of resources. To measure the social values, we introduce a social objective criterion. Hence, our approach could be regarded as a central economic price control with institutional price constraints for a decentralized economy. A simple example is employed to graphically illustrate the wedges between market prices and shadow prices. It has been shown that our problem can be solved through mixed integer linear programming techniques.
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Kim, S. Economic planning with institutional price constraints for a decentralized economy. Mathematical Programming 29, 100–112 (1984). https://doi.org/10.1007/BF02591732
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DOI: https://doi.org/10.1007/BF02591732