A Penalty Method for Linear Bilevel Programming Problems

A two-person, noncooperative game in which the players move in sequence can be modeled as a Bilevel Programming Problem (BLPP). In this chapter, a global optimization approach to BLPP is considered via a reverse convex transformation and the use of dominant cuts and an exact penalty function. Mathematical programs of this type arise in connection with policy problems such as environmental economics issues. Numerical examples illustrating the proposed method and its performance on variety of test problems are presented.

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