Abstract
Empirical applications of the quadratic programming form of spatial equilibrium commodity model have proliferated recently. However, the quality and performance of this modeling methodology have received little attention either in the form of stability analysis or validation analysis. In particular, a legitimate sensitivity analysis of the stability properties of the optimal solutions of such mathematical models is lacking. This paper attempts to meet this, need by conducting a two-step sensitivity analysis. First, a mathematical derivation of the stability conditions is performed based on the Kuhn-Tucker theorem. Second, these conditions are then embodied in a three-way factorial analysis. Such an approach is considered valuable for conducting future sensitivity analyses of commodity models of this type, especially where the Monte Carlo technique is not applicable.
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Yang, C.W., Labys, W.C. A sensitivity analysis of the stability properties of the QP commodity model. Empirical Economics 7, 93–107 (1982). https://doi.org/10.1007/BF02506827
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DOI: https://doi.org/10.1007/BF02506827