There is no rigid definition of a computational general equilibrium model. However, CGE models usually have most or all of the following characteristics. Each characteristic has advantages and disadvantages; click on the corresponding link for a quick summary.
This distinguishes CGE models from computational macroeconomic models which usually have only one agent. Large CGE models can have dozens or even hundreds of households and firms.
This is closely related to multiple agent characteristic but is important enough to merit a separate item. A hallmark of CGE models is that production is split up into at least two sectors.
CGE models are highly structural. Most or all behavioral equations in a CGE model are derived from optimization. Departures from optimization are the exception rather than the rule.
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Peter J Wilcoxen, The Maxwell School, Syracuse University
Revised 11/29/2003
