5 LINEAR BILEVEL PROGRAMMING: CONTINUOUS VARIABLES 5.1 INTRODUCTION ‘The vast majority of research on bilevel programming has centered on the linear version of the problem, alternatively known as the linear Stackelberg game. In this chapter we present several of the most successful algorithms that have been developed for this case, and when possible, compare their performance. We begin with some basic notation and a discussion of the theoretical character of the problem. For 2 €X CRY yEY CR™, FX x¥ Rand f:X x ¥ > RY, the linear bilevel programming problem (BLPP) can be written as follows: mip Fay) = aie tiv (1a) subject to Aix + Diy Sb: (5.1b) wip flaw) = ere toy (xe) subject to Aye + Bay S by (5.14) where c1,¢2 € R°, di,dz € R, by © RP, by € RY, Ay € RPM", By © RP*™, Az € R™, By € R%™™, The sets X and ¥ place additional restrictions on the variables, such as upper and lower bounds or integrality requirements. Of course, once the leader selects an 2, the first term in the follower's objective function becomes constant and can be removed from the problem. In this case, we replace f(=,y) with f(y). ‘The sequential nature of the decisions implies that y can be viewed as a function of 2; ic., y = ula). For convenience, we will refrain from writing this dependency explicitly unless there is reason to call attention to it, 195 victor albomoz@ usm c196 CHAPTER 5 Definition 5.1.1 (6) Constraint region ofthe DLP: S2{(z,y):2EX, ye Y, Aiz+ BiyS bi, Are + Bay S ba} (b) Feasible set for th follower foreach fixed # € X- S(z) £ {vEY : Bay $ bo ~ Asa) (c) Projection of $ onto the leader's deci n space: S(X) 2{@ EX :3yeY, Aie+ Bry Sb, Are + Bay $ bo} (d) Pollower's rational reaction set for # € $(X) Plz) {ye ¥ : ye argmin [f(z,9) 9 € S(e)]) (€) Inducible region: IR {(z,y) :(2,y) ES, ve P(2)} ‘To ensure that (5.1) is well posed it is common to assume that $ is nonempty and compact, and that for all decisions taken by the leader, the follower has some room to respond; ie., P(2) #0. The rational reaction set P(2) defines the response while the inducible region IR represents the set over which the leader may optimize. Thus in terms of the above notation, the BLPP can be written as min {F(x,y) = (2,y) € IR} (5.2) Even with the stated assumptions, problem (5.2) may not have a solution. In par- ticular, if P(2) is not single-valued for all permissible 2, the leader may not achieve his minimum payoff over IR (see Sections 1.3 and 8.1). ‘To avoid this situation in the presentation of algorithms, it will be assumed that P(2) is a point-to-point map. ‘This assumption does not appear to be unduly restrictive because a simple check is, available to see if the solution to (5.1), cal it (2*,y"), is unique. At such a point, all that is necessary is to solve the following linear program: mun (aay: (2,4) ES, az + diy = ae +i) (9.9) If the corresponding solution, say (2,9), produces an objective function value dij < dy’ than the uniqueness condition does not hold. It should be mentioned that in practice the leader will incur some cost in determining the decision space $(X) over which he may operate. For example, when the BLPP victor albomoz@ usm c