Market Equilibrium in a Model of a Planned Economy of the Soviet Type : A Proof of Existence and the Results of Numerical Simulations

We construct a one period model of an economy based upon a Soviet-type system, and examine a modified notion of equilibrium in it. Producers are not profit maximizers, but have quantitity oriented incentive functions. Taxes are part of the planning process without which there would not be an equilibrium for a given central plan. We prove the existence of a consumer market equilibrium and illustrate the model with numerical examples based upon a fixed point algorithm. The algorithm allows us to compare welfare and efficiency resulting from different plans