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Mixed-Integer Optimization Techniques for Robust Bilevel Problems with Here-and-Now Followers
(2025)
In bilevel optimization, some of the variables of an optimization problem have to be an optimal solution to another nested optimization problem. This specific structure renders bilevel optimization a powerful tool for modeling hierarchical decision-making processes, which arise in various real-world applications such as in critical infrastructure defense, transportation, or energy. Due to their nested structure, however, bilevel problems are also inherently hard to solve—both in theory and in practice. Further challenges arise if, e.g., bilevel problems under uncertainty are considered.
In this dissertation, we address different types of uncertainties in bilevel optimization using techniques from robust optimization. We study mixed-integer linear bilevel problems with lower-level objective uncertainty, which we tackle using the notion of Gamma-robustness. We present two exact branch-and-cut approaches to solve these Gamma-robust bilevel problems, along with cuts tailored to the important class of monotone interdiction problems. Given the overall hardness of the considered problems, we additionally propose heuristic approaches for mixed-integer, linear, and Gamma-robust bilevel problems. The latter rely on solving a linear number of deterministic bilevel problems so that no problem-specific tailoring is required. We assess the performance of both the exact and the heuristic approaches through extensive computational studies.
In addition, we study the problem of determining optimal tolls in a traffic network in which the network users hedge against uncertain travel costs in a robust way. The overall toll-setting problem can be seen as a single-leader multi-follower problem with multiple robustified followers. We model this setting as a mathematical problem with equilibrium constraints, for which we present a mixed-integer, nonlinear, and nonconvex reformulation that can be tackled using state-of-the-art general-purpose solvers. We further illustrate the impact of considering robustified followers on the toll-setting policies through a case study.
Finally, we highlight that the sources of uncertainty in bilevel optimization are much richer compared to single-level optimization. To this end, we study two aspects related to so-called decision uncertainty. First, we propose a strictly robust approach in which the follower hedges against erroneous observations of the leader's decision. Second, we consider an exemplary bilevel problem with a continuous but nonconvex lower level in which algorithmic necessities prevent the follower from making a globally optimal decision in an exact sense. The example illustrates that even very small deviations in the follower's decision may lead to arbitrarily large discrepancies between exact and computationally obtained bilevel solutions.
Bilevel problems are optimization problems for which parts of the variables
are constrained to be an optimal solution to another nested optimization
problem. This structure renders bilevel problems particularly well-suited for
modeling hierarchical decision-making processes. They are widely applicable
in areas such as energy markets, transportation systems, security planning,
and pricing. However, the hierarchical nature of these problems also makes
them inherently challenging to solve, both in theory and in practice.
In this thesis, we study different nonlinear problem settings for the
nested optimization problem. First, we focus on nonlinear but convex bilevel
problems with purely integer variables. We propose a solution algorithm that
uses a branch-and-cut framework with tailored cutting planes. We prove
correctness and finite termination of the method under suitable assumptions
and put it into context of existing literature. Moreover, we provide an
extensive numerical study to showcase the applicability of our method and
we compare it to the state-of-the-art approach for a less general setting on
suitable instances from the literature. Furthermore, we discuss challenges that
arise when we try to generalize our approach to the mixed-integer setting.
Next, we study mixed-integer bilevel problems for which the nested
problem has a nonconvex and quadratic objective function, linear constraints,
and continuous variables. We state and prove a complexity-theoretical hardness result for this
problem class and develop a lower and upper bounding scheme to solve
these problems. We prove correctness and finite termination of the proposed
method under suitable assumptions and test its applicability in a numerical
study.
Finally, we consider bilevel problems with continuous variables, where
the nested problem has a convex-quadratic objective function and linear
constraints. We reformulate them as single-level optimization problems using
necessary and sufficient optimality conditions for the nested problem. Then,
we explore the family of so-called P-split reformulations for this single-level
problem and test their applicability in a preliminary numerical study.