4/20/2017 GeneralizedNashBalanceProblems

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GeneralizedNashBalanceProblems

SimoneSagratella

December21,2011

1.Introduction

GeneralizedNashequilibriumproblems,orGNEP(generalizedNashequi
Libriumproblem),areageneralizationoftheoptimizationproblems.Alotofproblems
Ofanengineering,economic,mechanicalorelectronicnature,becauseoftheircomplexity
Cannotbemodeledasoptimizationproblems,butfallintothe
MoregeneralGNEPclass[5].
Inthisfirstchapter,theGNEPsareintroduced,definingthemainfeatures
Especially,youstartfromthedefinitionofoptimizationproblemtogetto
ThatofGNEP.
A`optimizationproblemandischaracterizedbyanobjectivefunctionf:Rn R
andp+mconstraintsh:Rn Rp andg:Rn Rmthatdefineasetallowable:

Min F(x)
X
H(x)=0
G(x)0.

Forexample,thefollowingoptimizationproblem

Min (x1)2 +(x2)2

X
x1 +x2 1=0
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1 x0
2 x0

hasn=2variablesx1 andx2,p=1andm=2equalityconstraintsconstraintsofinequality,
andthenf(x)=(x1)2 +(x2)2,h1 (x)=x1 +x2 1,g1 (x)=x1 andg2 (x)=x2.
Optimizationproblemsarenaturallycharacterizedbythepresenceofasingle
Deciderwhocontrolsallvariablesinplay.InaGNEP,therearemore
Decisionmakerswhocanonlycontrolapartofthevariablesinthegametosolveeachone
Itsownoptimizationproblemthatcouldalsodependonthevariablesofthe
Otherdecisionmakers.FormallyinaGNEPthereareNdecisionmakers(whichwewillcallfromnowon

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players),eachplayer{1,...,N}scanofdecisionvariablesxRn

Andmustsolveanoptimizationproblemcharacterizedbyanobjectivefunction
f: Rn Randm+phconstraints:Rn Rp g:Rn Rm
Whodefinea
togetherpermissible1:

Min f(x)
x

h(x)=0
g(x)0,

wherex=(x)N
Rn=1,orx`andtheunionofalltheplayersvariables.
N nvariablesx,Nobjectivefunctionsf,p=Thenthe N pconstraints
GNEPhasalln=
=1 =1
Equalityh,em= N minequalityconstraintsg.
=1
Let'stakealittleexampletobetterclarifytheconcept.Considerthefollowing
GNEP2

P1: Min x1 1
x1
2+x 12 P2: Min (x1) 2
2+x 2
2
x
1 x2

x1
1
+x 1210
x1
2
+x 121=0
x1 x2
10 10
x1 x2
20 20
Let'sanalyzethemainfeatures:
thereare2players

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thefirstplayerpossibilit`atochangethevariablesx1 toresolvetheproblem
P1andnis1 =2,p1 =0andm=1 3(iehas2variables,0equalityconstraints
And3constraintsofinequality)

thesecondplayerhaspossibilit`atochangethevariablesx2 tosolvetheproblem
P2andturnsn2 =2,p2 =1andm2 =2(iehas2variables,oneconstraintofequality
And2constraintsofinequality)

Thefirstplayerhastheonlyobjectivefunctionthatalsodependsonthevariables
Oftheotherplayer

Thesecondplayerhastheonlyconstraintofequalitythatalsodependsonthevariables
Oftheotherplayer

GNEPhasatotalofn=n1 +n2 =4variables,p=p1 +p2 =1constraints

equalityandm=m1 +m2 =5inequalityconstraints.
1Beverycarefulindices:identifiestheplayer,xarethevariableswhicharetheresponsibility
oftheplayer,andxarethevariablesofalltheplayers,f'andtheobjectivefunctionofplayer
pu`odependonthevariablesofalltheplayers,h(x)=0andg(x)0aretheconstraintsoftheplayer
Maydependonthevariablesofallplayers.
who
2Variablesaredenotedwithsuperscripttheplayer'snumberandthesubscriptnumberofthevariable
Oftheplayer.Forexamplex2 1
andthevariable`2Player1.

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2EquilibriumpointsofaGNEP

ThesolutionofaGNEPisalsocalledequilibriumpoint.Findone
AGNEPsolutionmeansfindingavalueforthevariablesofeachplayerthat
Optimizetheplayers'optimizationproblemsjointly.Thatis,inone
GNEPsolutionnoplayercanfurtherreducehisobjectivefunction
Onlybychangingitsownvariables.Let'sanalyzethisconceptwithvarious
Examples.

Example2.1ConsideraGNEPwith2playerswhoseoptimizationproblemsare

P1: Min x11 P2: Min (x1)

2
2
x1 x2

x1
11

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Bothplayerscaneditavariabletosolvetheirproblem
optimization.
Thefirstplayeraimstosolvetheoptimizationproblem

Min x1
x 1
1

x1
1
1

Whateverthevalueoftheotherplayer'svariable,thesolutiontothisproblemis
`optimizationand(x1 1)*=1.Thisisbecause,inthisoptimizationproblem,either
intheobjectivefunctionintheconstraintsthatneverappearsthevariablex2
1otherplayer.
Thesecondplayeraimstosolvetheoptimizationproblem

Min (x2)
1
2
x 2

Whateverthevalueoftheotherplayer'svariableisthesolutiontothisproblem
of`e(x2 optimization
1)*=0.Alsoherethereason`andtheabsenceinthisproblemof
variablex1
1otherplayer.
InconclusiontheGNEPsolutionis

((X1 ) (1 )
x* = 1)* = ,
(x2 0
1)*
or`x* andapointwhichoptimizestheoptimizationproblemsofalltheplayers,and
Soneitherofthetwoplayerscanfurtherreducetheirtargetfunction
Changingitsvariable. D

Inthenextexample,thesituationisslightlycomplicated.

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Example2.2ConsideraGNEPwith2playerswhoseoptimizationproblemsare

P1: Min x1 P2: Min (x2

x
1
1 x2
1)2

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x1
1 1 x1
2 x 11

Comparedtoexample2.1,onlyaconstraintforthesecondplayerwasintroduced.
Sincethefirstplayer'soptimizationproblemhasnotchanged,thenits
`solutionandasthefirst(x1
1)*=1,whateverthevalueofthevariableoftheotherplayer.
Thesecondplayeraimstosolvetheoptimizationproblem

Min (x1)
2
2
x 2

x2
1x 11
Inthisoptimizationproblemappearsinthevariableconstraintx1
1otherplayer.
Thismeansthatthevariationofthevariablex1
1thefeasiblesetischanged,andthen
Eventhegoodpointsoftheproblemchange.Forexample,ifx1
1=1oftheconstraint
problembecomesx2
11andtheoptimalpoint,and`(x 2 1)*=0.Figure1displaysthe
3 framework.

Figure1:Optimalsolution(x2 1)*Playeroftheproblemwhen2x 1 1=1.

Butifx1 theproblembecomesconstraintx2 andtheoptimalpoint,and`(x2

1=1 2 11 2 1)*=12
(Figure2).

3Notethatinthisfigure,asinallotherofthischapter,`anditisindicatedbytheaxisofabscissas
Thevariable,whiletheaxisoftheordinatesistheobjectivefunction.

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Figure2:Optimalsolution(x2 1)*Playeroftheproblemwhen2x 1 1=12 .

Bygeneralizingwecansaythatforthisoptimizationproblemthepointisgreat
(x2 1:
1)*assumesthesevaluestovarybyx 1

0ifx1
10
(x2
1)*=
x11 ifx11>0

Summarizingthefirstplayeralwayschoosesthepoint(x1
1)*=1,whilethesecondgioca
torechooses(x2
1)*dependingonhowthefirstplayersetsthevariablex 1 1.Thesolutionofthe
GNEPisobtainedin(x1
1)*=1`andthatchosenbytheplayer1inadefinitivemanner,and(x 2 1)*=1
thatischosenbytheplayer2afterthefirstplayerhasset(x1
1)*,then
((X1 ) (1 )
x* = 1)* = .
(x2 1
1)*
Sincex* neitherplayerpu`oreduceitsobjectivefunctionbychanging
Onlyitsownvariables:

Thefirstplayermaximizeshisoptimizationproblemtothebestin(x1
1)
*
thesecondplayerifhecouldalsochangethevariablex1 1,thenchoose
notpositive,becausecos`couldchooseitsvariablex2
1equaltozeroandget
Theminimumpossiblevalueoftheobjectivefunction.However,player2cannot
affectthevalueofx1 1`andthatwassetbytheplayer1equalto(x 1 1)*=1.Inthis
situationtheplayer2getsthemostbenefitbychoosing(x2
1)*=1.
D

Inthenextexample,thesituationisfurthercomplicated.
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Example2.3ConsideraGNEPwith2playerswhoseoptimizationproblemsare

P1: Min x1 P2: Min (x2

1 1)2
x1 x2

x1 x2
11 1x 11
x1
13x 2 1
Comparedtoexample2.2,onlyaconstrainthasbeenintroducedforthefirstplayer.
Thesecondplayer'soptimizationproblemhasnotchanged,andit'sstillworthit
rule
0ifx1
10
(x2
1)*=
x11 ifx11>0
Thefirstplayermustsolvetheoptimizationproblem

Min x1
x 1
1

x1
11
x1
1
3x 2 1
Inthisoptimizationproblemthevariableappearsinthesecondconstraintx2
1other
player.Thismeansthatthevariationofthevariablex2
1thefeasiblesetismodified,
Andthereforealsotheexcellentpointsoftheproblemchange.Forexample,ifx2
1=4thesecond
constraintoftheproblembecomesx1
11andthereforetheallowablesetof`anddefinedproblem
Fromtheonlyfirstconstraint.Thepointofgoodinthiscase`and(x1
1)*=1.Figure3illustrates
Justsaid.

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Figure3:Optimalsolution(x1
1)*1oftheplayer'sproblemwhenx 2 1=4.
Ifx2 1=1thesecondconstraintoftheproblembecomesx 1 12andinthiscase`andhe

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Dominatesthefirstconstraintanddefinesthepermissiblesetalone.Greatpointin
thiscase`and(x1
1)*=2(Figure4).

Figure4:Optimalsolution(x1
1)*1oftheplayer'sproblemwhenx 2 1=1.
Sowedeterminethatforthisoptimizationproblemtheoptimalpoint(x1 1)
Itassumesthefollowingvaluestovarybyx2 1: *

1 ifx2 12
(x1
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1)*= 3x2 1 ifx2 1<2

DeterminingasolutiontothisGNEPmeansfindingapointthatverifies
Thetworulesareexcellentforthetwoplayers.Thepoint

(x1 3
1)* 2
x* = =
(x2 3
1)* 2
CheckbothrulesandresolvetheGNEP.4 D

3GNEPclasses

AratherstandardhypothesisinthetreatmentofGNEP,andhenceitisunderstood,
Consistsofthedifferentiation,atleastinthesecondorder,ofallthefunctionsconstitutingthe
Playeroptimizationproblem.Inaddition,theGNEPswedealwithinthistext
4ThemethodsfordeterminingasolutionofaGNEPwillbetreatedindetailinthenextpi`u
Chapters.

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AreconvexGNEPs.Thismeansthatboththeobjectivefunctionsandtheadmissible
Werealltheplayersareconvexinplayervariables.Anexampleclarifies
Bettertheconceptofconvexitylimitedtoitsvariables:

Example3.1Thefollowingplayerproblem1isconvexinitsvariables:

Max x1
1 1)(x 1
and cos(x 2log(x 22))2
x 1
2

(x1
1)41
xX1
2+113+(x 2 1)2
Infactifwereportitinstandardformweget:

Min 1 x 1)+(x 1
x 1
1and cos(x 2log(x 22))2
2

(x1
1)4+10
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xX
1
2+113(x 2 1)20
Weverifytheconvessit`aoftheobjectivefunctioninthevariablesx1:

f(x) 1 ecos(x 1) 2
x1 1
x f1 (x)=
1
f(x) = 1
2(x21 log(x 22))
x2 1

f (x) f (x)
2 1 00 2 1

x1x11 x1x21 1 1
2
x x f1(x)= f (x) f (x)=
1 1 0
2 1 02 2 1

x2x11 x2x21 1 1

being2
x x f1(x)weobtainthepositivesemidefiniteconvessit`ainvariablesx 1
1 1

weverifytheconvessit`athefirstconstraintinthevariablesx1:

g 4(x1
1(x) 1

x1 1)3 1
x g1
1(x)=
1

g =
1(x) 0 1

x2 1

g
1(x) g
2
1(x)
1 12(x1 2
0 1

x1x11 x1x21
1 1)2 1
2
x x 1 (x)=
g 1 g = 0
1(x) g
1 1
2
1(x)
1 0 20 1

x2x11 x2x21
1 1

being2
x x 1
1 (x)positivesemidefinite(as12(x 1
g 1
1 1)20x 1 1)weobtainthecon
vessit`ainthevariablesx1
Weverifytheconvessit`asecondconstraintinthevariablesx1:
g 1
2(x) 1

x1 1
x g1
2(x)=
1

g = 1
2(x) 1

x2 1

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g
2(x) g
2(x)
2
001 2 1

x1x11 x1x21 1 1
2
x x 2 (x)=
g 1 g = 00 0
2(x) g
1 1

2(x)
2 1 2 1

x2x11 x2x21 1 1

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being x x 2
g 1
(x)weobtainthepositivesemidefiniteconvessit`ainx 1variables.
Notethatboththeobjectivefunctionandthesecondconstraintarenotconvexforallofthem
2 1 1

Xvariables. D

GNEPscanbespecializedsoyoucangetevensimplerproblemsfrom
Resolve.Startingfromthemostgeneralcaseandarrivingatthemostparticularcasewegetthe
FollowingtypesofGNEP:

Generalized:thereareatleast2players,andatleastoneplayerhastheset
Admissibledependingonthevariablesofotherplayers

Jointlyconvex:thereareatleast2players,andallplayershavethesame
Admissible(convex)setthatdependsonthevariablesofall

Standard(orNEP):thereareatleast2players,atleastoneplayerhasfun
Goalthatdependsonthevariablesofotherplayers,andallplayershave
Onlyconstraintsthatdependsolelyontheirvariables

Optimizationproblems:`thereisonlyoneplayerOrarethereal
Less2players,andallplayershaveobjectivefunctionandconstraintsthatdepend
exclusivelyfromitsownvariables5.

Figure5illustrateswellthegeneralizationofGNEPclasses.

Figure5:GNEPclasses.

5InthiscaseyouhaveNdistinctoptimizationproblems,oneforeachplayer.

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4MethodsforanalyticalsolutionofaGNEP

Inthischapter,wedealwithmethodsforanalyticaldeterminationofasolution
OfaGNEP.

4.1GraphicSolution(2Players1VariableEach)

WhenyouhavetosolveaGNEPwithonly2players,eachofwhichhasone
Variable,youcantakeadvantageofthegraphicalmethod.Let'sstartwithastandardGNEPexample:

P1: Min (x1 P2: Min (x2

1+x 212)2 11)2
x 1 x 2

0x1 0x2
15 13
ItconsidersaCartesianplaneinwhichtheabscissaarisesthefirstplayervariablex1
1
andorderedthesecondplayervariablex2
1.Thefirstthingtodoisdrawthetwo
Allowablesets(Figure6).OfcoursethepermissibleGNEPsetistheintersection
Ofthetwoplayer'seligiblesets.

Figure6:EligibleGNEPSet.

Thenextstepistotracethegoodunconstrainedanswersofthetwo
Cators.Tocalculatetheunrestrictedgoodanswers,therearetwocases:

inthecaseoflinearobjectivefunction,theunobtrusiveoptimalresponseoftheplayer
Willbe,foreachpossiblevalueoftheopponent'svariable,ifthecoefficient
Oftheobjectivefunction(tobeminimized)`andpositive,or+ifthecoefficientis`e
negative

inthecaseofnonlinearobjectivefunctionstrictlyconvexinthevariableofthe
6 player,justfindthelocusofpointswherethederivativeoftheobjectivefunction,

Comparedtotheplayer'svariable,isequaltozero.
6Othercaseswillnotbetreated.

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Inthecasethatweareconsideringtheobjectivefunctionsarenotlinearandthereforetocalculate
Theunreservedgoodresponsesyouhavetoderivethetwoobjectivefunctionsinthevariable
Oftheplayerandputthemequaltozero.Soforthefirstplayerwewillhaveagreatresponse
notboundx1 1+x 212=0,whilethebestresponseforthesecondplayerdoesnot
`boundex2
11=0(Figure7).

Figure7:Theunbeatenresponseofthefirstplayerisindicatedinred,thatis
Ofthesecondplayerandinyellow.

InthisstandardGNEPyoufindapointofbalanceatthepointwherethetwo
Unrestrictedgoodfeedbackcrosses,asthisintersectiontakesplaceinside
TheeligibleGNEPset.Especiallyinthisissuetherearenootherpoints
equilibriumoverx* =(1,1)(Figure8).

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Figure8:TheonlysolutionoftheGNEPisin(1,1).

Wemodifythepreviousstandardproblembychangingtheobjectivefunctionofthesecondone

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player:

( 5 )2
P1: Min (x1 P2: Min x2
x 1
1+x 212)2 x 2
1 2
0x1 0x2
15 13

Inthisnew`problemandpresentapointofequilibriumin(0,5 ),Asthefirst
2
Playerhasaverygoodtie,whilethesecondplayerhasagreatunconstrained
(Figure9).

Figure9:TheonlyGNEPsolution`and(0,5 ).
2
Wemodifythepreviousstandardproblembychangingthefunctionagain
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SecondPlayerGoal:

( 7 )2
P1: Min (x1 P2: Min x2
x 1
1+x 212)2 x
2
1 2
0x1 0x2
15 13
Inthisnewproblem,thereisapointofequilibriumin(0,3),sinceitisthefirst
Thatthesecondplayerhasagoodbound(figure10).

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Figure10:TheonlysolutionoftheGNEPisin(0,3).

Nowconsideraproblemjointlyconvex7:

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P1: Min (x1 P2: Min (3x1 2

1x 21)2 1 +x 19)
2
x 1 x 2

x1 x1
1+x 215 1+x 215
0x1 0x2
15 13

Inthis`problemandpresentapointofequilibriumin(9 ,9 )Whereboththefirstandthe
4 4
Secondplayerhaveagoodunconstrained,andanotherequilibriumpointin(2,3)
Wherethefirstplayerhasanexcellenttie,whilethesecondplayerhasagreatone
Unbound(figure11).

Figure11:TheGNEPsolutionsarein(9 ,9 )Andin(2,3).
4 4
Oftenequilibriumpointsarenotisolated,infact,ifweconsiderthefollowingproblem

7TheconstraintsthatdependsolelyontheopponentvariableshavenomeaningforGiovan
Andthendeletedfromthedefinitionoftheproblem.

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Jointlyconvex:

P1: Min (x1 P2: Min (1 x 2

x 1
1x 21)2 x2
1+x 211)
x1 x1
1+x 215 1+x 215
0x1 0x2
15 13
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theequilibriumpointsareallpoints(,5)with25 (Figure12).
2

Figure12:TheGNEPhasaninfinitenumberofequilibriumpoints:(,5),25.
2
ThegraphmethodisapplicabletogeneralizedGNEPs,butitisnecessarytodowell
Payattentiontoconstraints.Ifweresumetheproblemofexample2.3:

P1: Min x11 P2: Min (x1)2

2
x1 x2

x1 x2
11 1x 11
x1
13x 2 1
WecanrepresentthepermissiblesetofGNEPbyhighlightingseparatelythe
Constraintsofthefirstplayerfromthoseofthesecond(figure13).

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Figure13:EligibleGNEPSet.Inredthefirstplayer'stie,inyellow
Thoseofthesecond.

Obviouslyonlytheirownconstraintscancreateoptimalboundsforaplayer.Self
Weputintheunrestrictedgoodanswersitisevidentthattheonlypointofbalanceis
(3 3
)(Figure14).
2 2

Figure14:Theonlypointofequilibriumofthe`GNEPand(3 3 ).
2 2

Notethatpoint(1,2)cannotbeaGNEPsolutionastheconstraint
x1
13x 2 1belongsonlytothefirstplayerandthenpu`onotgenerateagreat
Boundforthesecondplayer.

Exercise4.1GraphicallysolvethefollowingGNEP:

P1: Min x1 P2: Min (x1

1x12 1+x 211)2
x 1 x 2

(x1 (x1
11)2+(x 2 11)21 11)2+(x 2 11)21
x1
2
1

15
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Exercise4.2GraphicallysolvethefollowingGNEP:

P1: Min (x1 P2: Min (x1

1(x 21)2)2 1+x 21)2
x 1 x2

(x11)
1
2+(x 2 1+1)21 (x11)
1
2+(x 2 1+1)21
Exercise4.3GraphicallysolvethefollowingGNEP:

P1: Min x1 P2: Min (x1

x
1
1 x2
1+x 211)2
(x1 (x1
1)2+(x 21+1)21 11)2+(x 2 1+1)21

4.2SolutionviaKKT

AmoregeneralmethodfordeterminingananalyticalsolutionofaGNEP
ConsistsinsolvingitsKKTconditionsystem.Infact,assumingvalidity
ofaqualifyingconditionofconstraints8,accordingtothefollowinglogicalstepsyouareobtained
TheequivalencebetweenthesolutionofaconvexGNEP(asareallthosetreatedin
Thistext)andthesolutionofitsKKTsystem,whichisformedbytheunionofsystems
OfKKTofallplayers:

TheKKTsare
Theproblemof GNEPKKT
Necessaryand
GNEP optimization Arenecessaryconditions.
= = Sufficientforthepro =
convex Ofeachplayer Andenoughfor
Theblazeofeveryplay
Isconvex Thebalance
Tors

FormallytheGNEP'sKKTconditionssystemis:

x f1 (x)+x h1 (x)1 +x g1 (x)1 =0

1 1 1

...

x fN(x)+hx N(x)+Nx gN(x)N=0

N N N

h1 (x)=0
...

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hN(x)=0
01 g1 (x)0
...

0NgN(x)0,

8AdvancedTopicsonqualificationconditionsoftheconstraintsofaGNEParebeyondthescopeof
thiscourse.SufficeittoknowthattheseconditionsimplythevalidityofKKTconditions.

16

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whereRp andRm For=1,...,N.Tosolvethisequationsystem

Andinequalities,whenitsdimensionsarenotexcessivelyhigh,onecanuseit
Samecombinatorialmethodusedinnonlinearprogramming.

Example4.4ResumeoneoftheNEPsseenintheprevioussection:

( 7 )2
P1: Min (x1
1
+x 212)2
P2: Min x1
2
2
x1 x2

0x1 0x2
15 13
ItsKKTconditionsystemis:

2(x1
1+x 212)1 1+12=0
7
2(x2 )2
1 2 1+22=0
1
1(x 11)=0
1
2(x1 15)=0
2
1(x 21)=0
2
2(x1 23)=0
1
10
1
20
2
10
2
20
1 x
10
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x150
1
x2
10
x2
130

easilyoccursthattheonlysystemofthis`solutionand(x1 2 )=
1,x 2
1,1
1,1
2,2
1,2
(0,3,2,0,0,1). D

Aspecificfeatureofjointlyconvexproblemsistohavesomepointsof
Particularbalance.Theseparticularequilibriumpointsarecalledvariableequilibriums,
Andtheircharacteristicisthatthesepointsareasolutiontothesystem
OfKKT'sproblemjointlyconvexwhenmultipliersassociatedwithsharedconstraints
Aretakenequalintheunderpassesofallplayers.Let'sclarifythisconceptwithone
example.

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Example4.5Resumeoneofthecommonlyconvexproblemsseenintheprevioussection:

P1: Min (x1 P2: Min (1 x 2

1x 21)2 1+x 211)
x 1 x
2

x1 x1
1+x 215 1+x 215
0x1 0x2
15 13
ItsKKTconditionsystemis:

2(x1
1x 21)+1112+13=0
2(x1
1+x 211)2+ 122+23=0
1
1(x1
1+x 215)=0
1
2(x 11)=0
1
3(x1
15)=0
1
2
(x1
1+x 215)=0
2
2(x 21)=0
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3
2
(x1
23)=0
1
10
1
20
3
1
0
1
2
0
2
20
2
30
x1
1+x 2150
1 x
10
x150
1

x2
10
x130
2

Allthesolutionsofthissystemofequationsandinequalitiesaretheequilibriumpointsofthe
problem.Betweenalloftheseequilibriumpointstherearesomevariationstofindthem
YouhavetosolvetheKKTsystemwhenplayerssharethesamemultiplier
associatedwiththesharedconstraint(ie1
1=,2 =1)andthentheKKTsystembecomes:
2(x1
1x 21)+1 2+13=0
2(x1
1+x 211)+2 2+23=0
(x1
1+x 215)=0
2
1
(x 11)=0
1
3(x1
15)=0
2
2(x 21)=0

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2
3(x1
23)=0
0
1
20
1
30
2
20
2
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x3
1
0
1+x 2150
1 x
10
x150
1

x2
10
x2
130

Theonlysolutiontothissystem,andthereforetheonlyvarianceoftheproblem
(x1,x
1
2
1,,1
2 ,1
3,2 3 )=(9 4,114 ,1.0.0.0.0).
2,2
D

Exercise4.6FindthebalancepointsofalltheGNEPsseensofarinthistext
ResolvingtheKKTconditions.

5MethodsfornumericalsolutionofaGNEP

Thischapterintroducesthemainalgorithmsforcalculatingapointof
EquilibriumofaGNEP.Essentially,suchalgorithmscanbeclassifiedintothree
Tegories:

1.thoseaimingatsolvingtheGNEP'sKKTsystem,

2.thosethatsolveasuitableGNEPreformulationasaproblemofot
Timing,

3.thosewhosolveasuitableGCSFreformulationasaninequality
Almostvariant.

AmongthealgorithmsthataimtosolvetheKNEWsystemoftheGNEParesurely
MentiontheNewtonmethodsappliedtoareformulationoftheKKTsystem
Asasystemofunequalequations(F.Facchinei,A.FischerandV.Piccialli[4]),andthat
Havegoodlocalconvergenceproperties.Goodglobalconvergenceproperties
AreguaranteedbytheclassofinternalmethodsfortheresolutionoftheKKToftheGNEPin
Tenseasasystemofequationswithnonnegativityconstraintsforsomevariables(A.Dreves,
F.Facchinei,C.KanzowandS.Sagratella[2]).Finallyamongthealgorithmsforthenumericalsolution
OftheGNEPKKTshouldbementionedthelinearizationmethodusedbythePATHsolver[1],
Which,althoughitdoesnotenjoygoodtheoreticalproperties,isthebasisofthesolverthatistodate

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Be,alongwiththeinternalmethodscitedjustbefore,amongthemostefficientandeffectiveforcalculation
OfaNashequilibrium.
MethodsthatsolveasuitableGNEPreformulationasanot
Globalizationgenerallydonothavegoodconvergenceproperties,howevertheycan
Tobeappliedeffectively,butoftennotefficiently,toresolveNEPandfor
Findvariationalequilibriaofajointlyconvexproblem.Amongthesemethodsisthe
ClassofreformulationsusingtheNikaidoIsodafunctionproposedbyC.Kanzowetal
tothe.[11],andtheunstrainedminimizationoftheEuclideanstandardofreformulationofthe
KKTasasystemofequations[2].
Finally,thethirdcategoryofalgorithmsreformattheGNEPasaquasi
Variance(J.S.PangandM.Fukushima[13]).Toappreciatethisreformulation`e
Itistypicaltousealgorithmsthatspecificallysolvequasivariationalinequalities,
Theseareessentiallyoftwotypes:projective(Y.NesterovandL.Scrimali[12])orthattheyuse
Multiplyagapfunction(M.Fukushima[9]).However,itshouldbestressedhowthesemethods
Theyhaveahightheoreticalvaluebutapoorpracticalapplication.Specificallyi
NEP,aswellastheproblemoffindingavariationalequilibriumofaproblemjointly
Convex[3],canbereformulatedasvariationalinequalities(PTHarker[10])
And,forthissubclassofinequalities,manyalgorithmshavebeenwidelystudied
(F.FacchineiandJ.S.Pang[7]).
Weconcludethischapterbydeepeningsomeofthenumericmethodsjustde
Written.Particularlyforthefirsttypeofalgorithms,thereformulationwillbeanalyzed
OfKKTasasystemofequationsandtheinternalmethod,andfinallyforthesecondtypology
OfalgorithmswillintroducetheNikaidoIsodafunction.

5.1ReformulationofKKTasasystemofequations

TheGNEPreformulationasasystemofequationsisthetransformationofthe
GNEPKKTconditionssysteminanonlinearequationsystem.Then
ItisnecessarytochangethecomplementaryconditionspresentintheKKT,forthisreason
Youcanusecomplementaryfunctions.

Definition5.1Afunction:R2 R`andacomplementarit`afunctionifitis
condition:
(a,b)=0 0,b0,ab=0
D

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Page21

Usingagenericcomplementaryfunction,theGKTsKKTbecomeone
Nonlinearequationsystem:

x f1 (x)+x h1 (x)1 +x g1 (x)1

1 1 1

...


x fN(x)+hx N(x)+Nx gN(x)N
N N N


h1 (x)
...
=0

hN(x)


(1,1 g(x))

...


(N,Ng(x))

Manycomplementaryfunctionsareknown,themostusedaretheminimalfunction:

min (a,b)=min(a,b)

AndtheFischerBurmaisterfunction:

FB (a,b)= a2 +b2 ab.

Theequationsystemresultingfromtheuseofsuchcomplementaryfunctionsresults
benonlinearand,ingeneral,notdifferentiable9.Tosolvethisequationsystem
VariousNewtonmethodshavebeenappliedwithgoodlocalconvergenceresults
[4].

9Understandingthetreatmentofnondifferentiableequationsarebeyondthescopeofthiscourse.Basti
KnowthatunequivocalequationsystemsdonothaveJacobianamatrixdefinedanywherebutitis
However,itispossibletoapplyNewtonmethodsfortheirresolution.

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5.2AninternalmethodfortheKKTsystemoftheGNEP

Byintroducingslackvariables,theKNEconditionsystemoftheGNEPisreformulated
Asasystemofequationswithnonnegativeconstraintsforsomevariables:

x f1 (x)+x h1 (x)1 +x g1 (x)1

1 1 1

...

x fN(x)+hx N(x)+Nx gN(x)N
N N N

h1 (x)

...


hN(x)

H(x,,,w)= =0,
g1 (x)+w1

...


gN(x)+wN


1 w1
...


NwN
1
...


N
0,
w1

...


wN

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whereRp Rm wRmfor=1,...,N,andoperatorindicatestheproduct
, ,

Componentpercomponentoftwovectors.
Thealgorithmstartsfromapoint((x)0,()0,()0,(w)0)whichtestsnottonegativit`a
andw.Essentially,ateveryiterationk,thealgorithmprovidesforthesolutionofasystem
OflineardotstocalculateaNewtonsearchdirection:

JH(xk1,k1,k1,wk1)d+H(xk1,k1,k1,wk1)=bk,

wherebk `andasuitablevectorofparameters.Thenthealgorithmcalculatesthestep
k byperformingafirstsearchofthelongdk linetoensurethatthenewpointgenerated
Checkagainthenonnegativityofew,andthenfurtherreducethepitchwithasecond
lineofresearch,alwaysalongdk,toensureasufficientreductionofaparticular
functionpotential,inordertoavoidtakingpoints((x)k,()k,()k,(w)k)whose
ewcomponentsaretooclosetozerobeforereachingthesolution.Finallyyou

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Updatethecurrentpoint:

(x)k (x)k1
()k =
()k1
+k dk.
()k ()k1

(w)k (w)k1

ThealgorithmjustdescribedconvergesgloballytoaGNEPsolutionifthema
(X,,,w)isnotuniqueforeachpoint(x,,,w)whosecomponentsew
I'mpositive.

5.3ReformulationthroughNikaidoIsodafunctionofaGNEP
jointlyasaconvexoptimizationproblem

HeconsidershimselfaGNEPjointlyconvexwhosecommonsetacceptabletoallplayers
ItisindicatedwithX.TheNikaidoIsoda`functionanddefinedas:

N
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(x,y):= [f(x,x)f(y,x)],
=1
wherex=(x) .Avariationalbalanceofjointlyconvexproblempu`o
=1,...,N,=
Itisfoundbycalculatingaglobaloptimumforthefollowingoptimizationproblem:

[ ]
min max (x,y) xy2 ,
xX yX 2

where>0'andanappropriateparameter.

6MethodsforreducingaGNEPatoneofitssub
pi`usimpleclass

InthischapterwedealwithsomemethodsforconvertingaGNEP
ofacertainclass(e.g.,ageneralizedGNEP)inanotherpi`usimpleGNEP
(E.g.aNEP),wheretheequilibriumpointsofthepi`usimpleGNEParealsopointsof
balanceoftheoriginalGNEP.Suchtransformationsareusefulbecausetheyallow
GNEPdifficulttotreatwithknownmethodsforGNEPpi`usimple.Howeversometimesthe
transformedproblem,althoughitbelongstoasimplesubclassofGNEP,is
notenjoyhisrequirementsnecessaryforasmoothresolution(egGNEP
simplecouldnotbedifferentiableornonconvex).
Thisinvolvesthestudynowtwoofthesemethods,one`andthepenalit`amethod(F.Facchinei
andC.Kanzow[6])thatallowsyoutotransformageneralGNEPinNEP,andtheother`
aparameterizationmethodthatallowstoreformulateaproblemjointlyconvex
withonlyequalityconstraintssharedasaNEP(F.FacchineiS.Sagratellaand[8]).

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6.1BringingageneralizedtoaGNEPwithNEP
penalit`a

AsageneralGNEP,thesubproblemofeachplayer{1,...,N}isdis
tinguonocomplicatedconstraints(whichalsodependsonthevariablesoftheotherplayers)from
simpleconstraints(whichdependssolelyonitsvariables):

min f(x)

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x h(x)=0

g(x)0
u(x)=0
t(x)0,

herehegconstraintsarecomplicatedconstraints,whileuetarethesimpleconstraints.`And
YoucantransformtheGNEPjustdescribedinaNEPpenalizingthecomplicatedconstraints
andgettingcos`foreachplayer{1,...,N}thefollowingproblem:

min f(x)+P(h(x)+max(0,g(x)))
x

u(x)=0
t(x)0,

whereP>0,=1,...,N,`andaparameterthatmustbeestimatedbyfollowingcertain
andnumericalprocedures `Andasuitablenorm.Theresulting`NEPandgenerally
nondifferentiableandinmostcaseslosessomeofpropriet`aconvessit`a
ownedbytheoriginalGNEP.Thepracticalapplicationofsuchmethodsdoesnotleadtoa
greatadvantage,butitcouldbenecessaryintheabsenceofasolverforproblems
generalized.

6.2Bringingaproblemjointlywithconvexconstraintsugua
equalitysharedaNEP

Givenaconvexproblemjointlywithonlyequalityconstraintsshared:

min f(x)
x

N
Ax=b
=1
Cx=d
g(x)0,

where(A1 ,...,AN,b)definethesharedconstraints,while(C,d)andgdefinetheconstraints
private,=1,...,N.Isitpossibleappropriatelytoparameterizetheaboveissue

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toturnitintoaNEPwhosesolution`andabalanceoftheorigipointproblem
ginario.Todothis`preliminaryandnecessarytofindapointxeligiblefor
allplayers:

N
Ax=b
=1
C1 x1 =d1
g1 (x1 )0
...

CNxN=dN
gN(xN)0

Theparameterizedproblem`andNEPinwhicheachplayer{1,...,N}mustfix
thefollowingoptimizationproblem:

min f(x)
x

Ax=Ax
Cx=d
g(x)0.

ItiseasytoverifythateachpointthatsatisfiestheKKTsystemofNEPderived`and
KKTpointoftheproblemandthenjointlyconvexoriginal`andabalance.
Inaddition,theNEPderivedenjoysthesamepropriet`aoftheconvessit`aedifferenziabilit`a
originalproblem,andsothistypeoftransformationand`extremelyusefulboth
theoreticalandinpracticalapplications.

9ThanksAndreaMannoBuffalo,TizianaD'AlfonsoandMirkoBianconeforkindlycol
laborevisionofthistext.

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References

[1]SPDirkseandFerrisMC,Thepathsolver:astabilizationnommonotone
schemeformixedcomplementarityproblems,Optim.Meth.andSoftware,5(1995),
pp.123156.

[2]A.Dreves,F.Facchinei,C.Kanzow,andS.Sagratella,Onthesolution
oftheKKTconditionsofgeneralizedNashequilibriumproblems,SIAMJ.Optim.,21
(2011),pp.10821108.

[3]F.Facchinei,A.Fischer,andV.Piccialli,OngeneralizedNashandgames
variationalinequalities,Oper.Res.Lett.,35(2007),pp.159164.

[4]F.Facchinei,A.Fischer,andV.Piccialli,GeneralizedNashequilibriumpro
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[5]F.andC.FacchineiKanzow,GeneralizedNashequilibriumproblems,4OR,5
(2007),pp.173210.

[6]F.andC.FacchineiKanzow,PenaltymethodsforthesolutionofgeneralizedNash
equilibriumproblems,SIAMJ.Optim.,20(2010),pp.22282253.

[7]F.FacchineiandJ.S.Pang,FiniteDimensionalVariationalInequalitiesand
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SpringerVerlag,NewYork,2003.

[8]F.andS.FacchineiSagratella,Onthecomputationofallsolutionsofjointly
convexgeneralizedNashequilibriumproblems,Optim.Lett.,5(2011),pp.531547.

[9]M.Fukushima,Aclassofgapfunctionsforquasivariationalinequalityproblems,J.
ofInd.andManag.Optim.,3(2007),pp.165171.

[10]PTHarker,Avariationalinequalityapproachforthedeterminationofoligopolistic
marketequilibrium,Math.Prog.,30(1984),pp.105111.

[11]A.vonHeusingerandC.Kanzow,Optimizationreformulationsofthegeneralized
NashequilibriumproblemusingNikaidoIsodatypefunctions,Comput.Optim.and
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[12]Y.NesterovandL.ScrimaliSolvingstronglymonotonevariationalandquasi
variationalinequalities,Corediscussionpaper,2006/107.
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[13]J.S.PangandM.Fukushima,Quasivariationalinequalities,generalizedNash
equilibria,andmultileaderfollowergames,Comput.Manag.Sci.,2(2005),pp.2156
(Erratum:ibid.6(2009),pp.373375).

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