An Introduction to Simulated Annealing Algorithms for the Computation ofEconomic Equilibrium

Authors:
Lihua Wu;Yuyun Wang
Affiliations:
Institute of System Science, Academia Sinica, Beijing 100080, P.R. China;Institute of System Science, Academia Sinica, Beijing 100080, P.R. China
Venue:
Computational Economics
Year:
1998

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Abstract

Economic equilibrium computation has raised the issue of globaloptimizationalgorithms since economic equilibrium problems can be cast as a globaloptimization problem. However, nearly all conventional algorithms stop whenthey find a local optimum. Over the last decade a number of new optimizationalgorithms have appeared, simulated annealing is one of them. It is apowerfulstochastic search algorithm applicable to a wide range of problems for whichlittle prior knowledge is available, and it asymptotically probabilisticallyconverges to a global optimum. In this paper, we will give a brief introduction to simulated annealing and apply it to the computation ofeconomic equilibrium.We also reported our computational experience in the paper. This earlyresult shows that the application of simulated annealing to computationof economic equilibrium is encouraging and it deserves further research.