A hybrid algorithm for the solution of a single commodity spatial equilibrium model

In this paper we propose a hybrid algorithm for the solution of a large-scale single commodity spatial equilibrium model. This model can be stated as a Linear Complementarity Problem (LCP) with a singular Symmetric Positive Semi-Definite (SPSD) matrix whose structure is closely related to the network structure of the model. The hybrid scheme is a combination of Predictor-Corrector (PC) and Parametric Principal Pivoting (PPP) algorithms and its implementation takes full advantage of the structure of the matrix of the LCP. We report computational experience on the solution of large-scale spatial equilibrium problems with up to 1000 regions that shows the great efficiency of the approach discussed in this paper.