We present polynomial-time interior-point algorithms for solving the Fisher and Arrow–Debreu competitive market equilibrium
problems with linear utilities and
n players. Both of them have the arithmetic operation complexity bound of
O(n4log(1/e{O(n^{4}log(1/\epsilon})) for computing an
e{\epsilon} -equilibrium solution. If the problem data are rational numbers and their bit-length is
L, then the bound to generate an exact solution is
O(
n
4
L) which is in line with the best complexity bound for linear programming of the same dimension and size. This is a significant
improvement over the previously best bound
O(n8log(1/eO(n^{8}log(1/\epsilon)) for approximating the two problems using other methods. The key ingredient to derive these results is to show that these
problems admit convex optimization formulations, efficient barrier functions and fast rounding techniques. We also present
a continuous path leading to the set of the Arrow–Debreu equilibrium, similar to the central path developed for linear programming
interior-point methods. This path is derived from the weighted logarithmic utility and barrier functions and the Brouwer fixed-point
theorem. The defining equations are bilinear and possess some primal-dual structure for the application of the Newton-based
path-following method.
Mathematics Subject Classifications 91B50 - 90C25 - 90C51
Dedicated to Clovis Gonzaga on the occassion of his 60th birthday.
This author was supported in part by NSF Grants DMS-0306611 and DMS-0604513. The author would like to thank Curtis Eaves,
Osman Güler, Kamal Jain and Mike Todd for insightful discussions on this subject, especially on their mathematical references
and economic interpretations of the fixed-point model presented in this paper.