AGE models, being based on Arrow–Debreu general equilibrium theory, work in a different manner than
CGE models. The model first establishes the existence of equilibrium through the standard Arrow–Debreu exposition, then inputs data into all the various sectors, and then applies Scarf’s algorithm (Scarf 1967a, 1967b and Scarf with Hansen 1973) to solve for a price vector that would clear all markets. This algorithm would narrow down the possible relative prices through a simplex method, which kept reducing the size of the ‘net’ within which possible solutions were found. AGE modelers then consciously choose a cutoff, and set an approximate solution as the net never closed on a unique point through the iteration process. CGE models are based on macro balancing equations, and use an equal number of equations (based on the standard macro balancing equations) and unknowns solvable as simultaneous equations, where exogenous variables are changed outside the model, to give the endogenous results. ==References==