transmcp.gms : Transportation Model as Equilibrium Problem

**Description**

Dantzig's original transportation model (TRNSPORT) is reformulated as a linear complementarity problem. We first solve the model with fixed demand and supply quantities, and then we incorporate price-responsiveness on both sides of the market.

**Reference**

- Dantzig, G B, Chapter 3.3. In Linear Programming and Extensions. Princeton University Press, Princeton, New Jersey, 1963.

**Small Model of Type :** MCP

**Category :** GAMS Model library

**Main file :** transmcp.gms

```
$title Transportation model as equilibrium problem (TRANSMCP,SEQ=126)
$onText
Dantzig's original transportation model (TRNSPORT) is
reformulated as a linear complementarity problem. We first
solve the model with fixed demand and supply quantities, and
then we incorporate price-responsiveness on both sides of the
market.
Dantzig, G B, Chapter 3.3. In Linear Programming and Extensions.
Princeton University Press, Princeton, New Jersey, 1963.
Keywords: linear complementarity problem, transportation problem, equilibrium
problem
$offText
Set
i 'canning plants' / seattle, san-diego /
j 'markets' / new-york, chicago, topeka /;
Parameter
a(i) 'capacity of plant i in cases'
/ seattle 350
san-diego 600 /
b(j) 'demand at market j in cases'
/ new-york 325
chicago 300
topeka 275 /
esub(j) 'price elasticity of demand (at prices equal to unity)'
/ new-york 1.5
chicago 1.2
topeka 2.0 /;
Table d(i,j) 'distance in thousands of miles'
new-york chicago topeka
seattle 2.5 1.7 1.8
san-diego 2.5 1.8 1.4;
Scalar f 'freight in dollars per case per thousand miles' / 90 /;
Parameter c(i,j) 'transport cost in thousands of dollars per case';
c(i,j) = f * d(i,j) / 1000;
Parameter pbar(j) 'reference price at demand node j';
Positive Variable
w(i) 'shadow price at supply node i'
p(j) 'shadow price at demand node j'
x(i,j) 'shipment quantities in cases';
Equation
supply(i) 'supply limit at plant i'
fxdemand(j) 'fixed demand at market j'
prdemand(j) 'price-responsive demand at market j'
profit(i,j) 'zero profit conditions';
profit(i,j).. w(i) + c(i,j) =g= p(j);
supply(i).. a(i) =g= sum(j, x(i,j));
fxdemand(j).. sum(i, x(i,j)) =g= b(j);
prdemand(j).. sum(i, x(i,j)) =g= b(j)*(pbar(j)/p(j))**esub(j);
* declare models including specification of equation-variable association:
Model
fixedqty / profit.x, supply.w, fxdemand.p /
equilqty / profit.x, supply.w, prdemand.p /;
* initial estimate:
p.l(j) = 1;
w.l(i) = 1;
Parameter report(*,*,*) 'summary report';
solve fixedqty using mcp;
report(i,j,"fixed") = x.l(i,j);
report("price",j,"fixed") = p.l(j);
report(i,"price","fixed") = w.l(i);
* calibrate the demand functions:
pbar(j) = p.l(j);
* replicate the fixed demand equilibrium using flexible demand func:
solve equilqty using mcp;
report(i,j,"flex") = x.l(i,j);
report("price",j,"flex") = p.l(j);
report(i,"price","flex") = w.l(i);
* compute a counter-factual equilibrium using fixed demand func:
c("seattle","chicago") = 0.5 * c("seattle","chicago");
solve fixedqty using mcp;
report(i,j,"fixed CF") = x.l(i,j);
report("price",j,"fixed CF") = p.l(j);
report(i,"price","fixed CF") = w.l(i);
* compute a counter-factual equilibrium using flexible demand func:
solve equilqty using mcp;
report(i,j,"flex CF") = x.l(i,j);
report("price",j,"flex CF") = p.l(j);
report(i,"price","flex CF") = w.l(i);
display report;
execute_unload 'mcpReport.gdx', report;
```