Solving linear complementarity problems without an LCP solver

Introduction

The linear complementarity problem (LCP) can be stated as [1]: 

LCP Problem
\[\begin{align} &\text{Find $\color{darkred}x\ge 0,\color{darkred}w\ge 0$ such that:}\\ & \color{darkred}x^T\color{darkred}w = 0 \\ &\color{darkred}w =\color{darkblue}M  \color{darkred}x + \color{darkblue}q\end{align}\]

In many cases we require that \(\color{darkblue}M\) is positive definite.

The LCP has different applications, including in finance, physics, and economics [2]. Off-the-shelf LCP solvers are not widely available. Here I will show how to solve LCPs with other solvers. This question comes up now and then, so here is a short recipe post.

Clustering models

In Statistics (nowadays called Data Science or A.I. for public relations reasons), clustering is one of the most popular techniques available. Of course, nothing beats linear regression in the popularity contest. Here, I like to discuss two clustering models: \(k\)-means and \(k\)-medoids. For these models, there exist well-defined equivalent Mixed-Integer Programming models. In practice, they don't work very well except for small data sets. I think they are still useful to discuss for different reasons:

• The formulations are interesting. They have some angles that may not be obvious at first.
• They define the problem in a succinct way. Verbal descriptions are always fraught with imprecision and vagueness. A reference model can help to make things explicit. I.e. use a model as a documentation tool.
• Not all data sets are large. For small data sets, we can prove optimality where the usual heuristics only can deliver good solutions, without much information about the quality of the solution. Obviously, clustering is often used in situations where ultimate optimality may not matter much, as it is frequently used as an exploratory tool.
• We can adapt the model to special cases. Adding constraints such as a minimum and maximum number of points per cluster comes to mind [3].