Computing Equilibrium Prices in Exchange Economies with Tax Distortions

  • Bruno Codenotti
  • Luis Rademacher
  • Kasturi Varadarajan
Part of the Lecture Notes in Computer Science book series (LNCS, volume 4051)


We consider the computation of equilibrium prices in market settings where purchases of goods are subject to taxation. While this scenario is a standard one in applied computational work, so far it has not been an object of study in theoretical computer science. Taxes introduce significant distortions: equilibria are no longer Pareto optimal, sufficient conditions for uniqueness do not continue to guarantee it, existence itself must be revisited. We analyze the effects of these distortions on scenarios which, in the absence of taxes, admit polynomial time algorithms. In spite of the loss of certain structural properties (including uniqueness), we are able to obtain polynomial time algorithms or approximation schemes in several instances where the model without taxes admitted them.


Utility Function Equilibrium Price Exchange Economy Initial Endowment Theoretical Computer Science 
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Copyright information

© Springer-Verlag Berlin Heidelberg 2006

Authors and Affiliations

  • Bruno Codenotti
    • 1
  • Luis Rademacher
    • 2
  • Kasturi Varadarajan
    • 3
  1. 1.IIT-CNRPisaItaly
  2. 2.Department of MathematicsMIT 
  3. 3.Department of Computer ScienceThe University of Iowa 

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