On two-level optimization

Decentralized planning has long been recognized as an important decision making problem. Many approaches based on the concepts of large scale system decomposition have generally lacked the ability to model the type of truly independent subsystems which have often existed in practice. Similarly, tractable game-theoretic approaches have not allowed for a continuous solution space in which one player´s decision restricts the feasible choices of another. This correspondence offers a formulation to help model this type of decision making hierarchy. Characterizations and algorithmic approaches for a class of two-level problems are discussed.