A global optimization method for nonlinear bilevel programming problems

Nonlinear two-level programming deals with optimization problems in which the constraint region is implicitly determined by another optimization problem. Mathematical programs of this type arise in connection with policy problems to which the Stackelberg leader-follower game is applicable. In this paper, the nonlinear bilevel programming problem is restated as a global optimization problem and a new solution method based on this approach is developed. The most important feature of this new method is that it attempts to take full advantage of the structure in the constraints using some recent global optimization techniques.