A fixed point algorithm with economic applications (Q1115331)

A new fixed point algorithm applicable to large scale economic problems is developed. Motivated by successive approximation the algorithm iterates on a convex combination of the traditional price-to-price map and the identity map. The actual combination used is determined from the convergence error of the previous iteration. The specified convex combination is guaranteed to be a contraction if the original map is Lipschitz-continuous and antitonal. These sufficient conditions are shown to be weaker than the contraction requirement. A simple supply-demand example is presented to show the advantages to this algorithm over successive approximation.