  Equilibrium equations in the form of complementarity conditions often appear
as constraints in optimization problems. Problems of this type are commonly
referred to as mathematical programs with complementarity constraints (MPCCs).
A popular method for solving MPCCs is the penalty interior-point algorithm
(PIPA). This paper presents a small example for which PIPA converges to a
nonstationary point, providing a counterexample to the established theory. The
reasons for this adverse behavior are discussed.
