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A self-consistent, coupled optoelectronic simulation approach for studying microcavity nanowire lasers is presented. To focus the discussion, we use GaN nanowires to illustrate the methodology. The comprehensive model solves, simultaneously and self-consistently, the carrier transport equations and the photon rate equations. The basic physical model takes into account both bulk and surface dark carrier recombination processes. It includes stimulated emission, the anisotropic optical gain typical of the wurtzite GaN structure, the modified spontaneous emission, and its coupling into the lasing modes as a consequence of microcavity effects. The model further incorporates band-gap shrinkage effects due to band renormalization; it includes the complex dispersion and reflectivity relations of the guided modes, and the effects of multiple lateral and longitudinal lasing and nonlasing optical modes. We provide a detailed discussion of the influence of other important effects on the operation of optically pumped GaN nanowire lasers. Finally, we want to point out that the method is sufficiently general that it can be used to study any class of nanowire lasers.