Stackelberg solutions for two-level dynamic systems

In this paper, we study some aspects of performance optimization of dynamic systems upon which control action is exerted at two different levels. The system considered is composed of N subsystems each controlled by a local controller and a central controller. The objective function of each local controller assesses the performance of the corresponding subsystem, and the objective function of the central controller assesses the performance of the overall system. Such optimization problems often arize in practice, such as in many computer-controlled engineering processes, economic systems and power networks. In this paper the Stackelberg approach of game theory is considered for the optimization of such systems.