Conventional analysis on Leontief substitution system assumes perfect substitutability among commodities produced by alternative processes. Assumption of perfect competition, however, is likely to lead to "bang-bang" phenomena. In many real situations, such sensitive optimal solution behavior cannot be comfortably accepted.
This thesis studies a Leontief input-output system with constant elasticity of substitution among competing processes, one extreme case of which becomes a Leontief system with perfect substitutability. Existence, uniqueness of a solution and its computational scheme along with convergence properties are discussed. Results of this study including the computation method can be applied to the perfect substitution case, so that the approach taken here is a robust and general one.
In the latter part of the study, Leontief system is extended such that final demands and primary resource costs are expressed as functions rather than given as constants. The suggested computational scheme can be readily extended to this general system.
