Decision Making Under Uncertainty pp 135-151 | Cite as

# Qualitative Implications of Uncertainty in Economic Equilibrium Models

## Abstract

Many economic equilibrium models have a structure that consists of econometrically estimated demand models and supply models that contain explicit representations of the supply technologies, known as process models. Econometric models measure the consequences of peoples’ decisions and are typically used to estimate demand because it is impossible to represent each individual decision and its consequences. Process modeling is an outgrowth of input-output analysis and linear programming and began with Markowitz [1955]. Here the technologies and possible decisions are modeled explicitly in an optimization model. The solution to the model consists of the decisions of optimizing firms and their consequences. Each modeling approach has had a long history and combining the two types of models into one economic equilibrium model is quite common. Examples are the energy-market models, PIES (Hogan [1975]), IFFS (Murphy, Conti, Sanders and Shaw [1988]), and NEMS (Energy Information Administration [1998]). For a summary of all three, see Murphy and Shaw [1995].

## Keywords

Stochastic Program Consumer Surplus Supply Curve Stage Decision Energy Information Administration## Preview

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