On the existence and computation of an equilibrium in an economy with constant returns to scale production

In this paper the authors consider the problem of finding an equilibrium in an economy with non-linear constant returns to scale production activities. To find an equilibrium they propose an adjustment process in which the prices of the commodities and the activity levels of production adjust simultaneously. The process starts at a price vector at which each production activity has non-positive profit. The authors show that the process follows a path which connects the starting point with an equilibrium of the economy. From this it follows that the existence of a price vector at which each production activity has non-positive profit implies the existence of an equilibrium. The equilibrium can be computed by using a simplicial algorithm or by solving a sequence of Linear Variational Inequality Problems.