Economic Equilibrium Modeling with GAMS

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---- VAR PXB . 1.179 +INF .
---- VAR PYB . 1.179 +INF .
---- VAR A . 1.179 +INF .
---- VAR B . 1.179 +INF .
---- VAR WA . 1.000 +INF .
---- VAR WB . 1.000 +INF .
---- 543 PARAMETER EV_A = 0.108 HICKSIAN EQUIVALENT
VARIATION FOR AGENT A
PARAMETER EV_B = 0.108 HICKSIAN EQUIVALENT
VARIATION FOR AGENT B
Exercise (5.i): Find an "optimal tari " in this model for agent A, assuming that Agent
B does not retaliate and leaves her tari rate at the benchmark level.
* Return to original tariffs
T_A = 0.1;
T_B = 0.1;
* Loop using different tariff rates and extract welfare index to
* compute the Hicksian equivalent variation:
SET SC Scenarios /SC1*SC7/;
PARAMETER TVALUE(SC) TARIFF VALUE FOR SC
/SC1 0, SC2 0.2, SC3 0.4, SC4 0.6,
SC5 0.8, SC6 1.0, SC7 1.2/
SUMMARY(SC,*) HICKSIAN EQUIVALENT VARIATION BY SCENARIO;
LOOP(SC,
* Install a tariff rate impossed by Agent A in the current scenario:
* (T_B remains at the benchmark level).
T_A = TVALUE(SC);
$INCLUDE TARIFFS.GEN
SOLVE TARIFFS USING MCP;
* Extract welfare index and compute Hicksian EV:
SUMMARY(SC,"EV_A") = 100 * (WA.L - WA0)/WA0;
SUMMARY(SC,"EV_B") = 100 * (WB.L - WB0)/WB0;
);
OPTION TVALUE:2;
DISPLAY TVALUE, SUMMARY;