Step 1:

MODEL A: I solved a cost minimization problem using NLP. The results

for the endogenous variables Y look okay.

Step 2:

Then, I included one more equation (W) which calculates a new variable

(X).

The variable X is an expression based on the endogenous variables (Y)

of Model A.

This new equation (W) is included with Model A and solved – MODEL B.

In the presence of the equation W, the solution for endogenous

variables (Y) is

**drastically different and does not make sense.**

Why don’t the results for Model B make sense?

Is it due to numerical instability - how to correct it?

Thank you.

Subbu

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