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Zbl 1115.90059
Pang, Jong-Shi; Fukushima, Masao
Quasi-variational inequalities, generalized Nash equilibria, and multi-leader-follower games. (English)
[J] Comput. Manag. Sci. 2, No. 1, 21-56 (2005); erratum ibid. 6, No. 3, 373-375 (2009; Zbl 1168.90618). ISSN 1619-697X; ISSN 1619-6988/e

Summary: The noncooperative multi-leader-follower game can be formulated as a generalized Nash equilibrium problem where each player solves a nonconvex mathematical program with equilibrium constraints. Two major deficiencies exist with such a formulation: One is that the resulting Nash equilibrium may not exist, due to the nonconvexity in each player's problem; the other is that such a nonconvex Nash game is computationally intractable. In order to obtain a viable formulation that is amenable to practical solution, we introduce a class of remedial models for the multi-leader-follower game that can be formulated as generalized Nash games with convexified strategy sets. In turn, a game of the latter kind can be formulated as a quasi-variational inequality for whose solution we develop an iterative penalty method. We establish the convergence of the method, which involves solving a sequence of penalized variational inequalities, under a set of modest assumptions. We also discuss some oligopolistic competition models in electric power markets that lead to multi-leader-follower games.

MSC 2000:: *90C33 Complementarity problems
91A65 Hierarchical games

Keywords: quasi-variational inequalities; leader-follower games; Nash equilibrium; electric power market modeling; oligopolistic competition; mathematical program with equilibrium constraints

Citations: Zbl 1168.90618

Cited in: Zbl 1168.90618

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