An Industrial Sector Model Formulation and its Computation for Policy Analysis

Abstract

A modeling framework and its computational methodology for an industrial sector of the economy are investigated. The suggested industrial sector model is characterized by a programming (process analysis) representation of a production sector and an econometric estimation of the price sensitive (own and cross-prices) demands. By introducing the price sensitive demands into the process analysis representation of the production sector, it becomes possible to analyze and plan the pricing policy, the optimal production schedules and capacity expansion plans within a single framework. The computational scheme suggested in the report is based on the iterative approach each of which solves a separable convex programming problem.