A SOLUTION METHOD FOR THE LINEAR STATIC STACKELBERG PROBLEM USING PENALTY-FUNCTIONS

This note presents a new solution technique for the linear constrained static Stackelberg problem. The duality gap of the follower's problem is appended to the leader's objective with a penalty. This structure leads to the decomposition of the composite problem into a series of linear programs leading to an efficient algorithm. We prove that local optimality is reached for an exact penalty function and illustrate the method with some examples. © 1990 IEEE