 Solution

The monotone decomposition of a submodular set function subtracts each element's smallest possible marginal increment. For $x\in V$, defineThe set function $h$ is a modular set function: the contributions of each element, and the constant $f(\varnothing )$, cancel inSubtracting this equality from the submodularity inequality for $f$ proves that $g$ is a submodular set function. Also $g(\varnothing )=0$, so it is a normalised set function.

For $x\notin S$, the inclusion $S\subseteq V\setminus \{x\}$ and diminishing returns implyAdding elements one at a time now proves that $g$ is a monotone set function. Since it starts at zero, it is also a nonnegative function. Thus $f=g+h$ has all the required properties.

Here modular set function means equality in the intersection–union identity; a constant term is allowed. If one imposed the additional convention $h(\varnothing )=0$, the claimed decomposition of an arbitrary $f$ would require $f(\varnothing )=0$. The displayed constant is essential for the problem as stated. For $V=\varnothing$, take $g=0$ and $h=f$.