Abstract: A UV-decomposition method for solving a mathematical program with equilibrium constraints (MPEC) problem with linear complementarity constraints is presented. The problem is first converted into a nonlinear programming one. The structure of subdifferential a corresponding penalty function and results of its UV-decomposition are given. A conceptual algorithm for solving this problem with a superlinear convergence rate is then constructed in terms of the obtained results.

Key words: U-Lagrangian, nonsmooth optimization, nonlinear programming, subdifferential, UV-decomposition, MPEC problem