Lecture 4 Sensitivity-374225-16754388280675

Slides by
John
Loucks
St. Edward’s
University
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1
Chapter 3: LP - Sensitivity Analysis
and Interpretation of Solution
 Introduction to Sensitivity Analysis

 Objective Function Coefficients
 Right-Hand Sides
 Limitations of Classical Sensitivity Analysis
2
Introduction to Sensitivity Analysis
 In the previous chapter we discussed:

• objective function value
• values of the decision variables
• reduced costs
• slack/surplus
 In this chapter we will discuss:
• changes in the coefficients of the objective
function
• changes in the right-hand side value of a
constraint
3
Introduction to Sensitivity Analysis
 Sensitivity analysis (or post-optimality analysis) is

used to determine how the optimal solution is
affected by changes, within specified ranges, in:
• the objective function coefficients
• the right-hand side (RHS) values
 Sensitivity analysis is important to a manager who
must operate in a dynamic environment with
imprecise estimates of the coefficients.
 Sensitivity analysis allows a manager to ask certain
what-if questions about the problem.
4
Objective Function Coefficients
 Let us consider how changes in the objective function

coefficients might affect the optimal solution.
 The range of optimality for each coefficient provides
the range of values over which the current solution
will remain optimal.
 Managers should focus on those objective
coefficients that have a narrow range of optimality
and coefficients near the endpoints of the range.
5
Right-Hand Sides
 Let us consider how a change in the right-hand side

for a constraint might affect the feasible region and
perhaps cause a change in the optimal solution.
 The improvement in the value of the optimal solution
per unit increase in the right-hand side is called the
shadow price or dual value.
 The range of feasibility is the range over which the
dual value is applicable.
 As the RHS increases, other constraints will become
binding and limit the change in the value of the
objective function.
6
Shadow Price or Dual Value
 Graphically, a dual value is determined by adding +1

to the right hand side value in question and then
resolving for the optimal solution in terms of the same
two binding constraints.
 The dual value for a nonbinding constraint is 0.
7
Range of Feasibility
 The range of feasibility for a change in the right hand

side value is the range of values for this coefficient in
which the original dual price remains constant.
 Graphically, the range of feasibility is determined by
finding the values of a right hand side coefficient such
that the same two lines that determined the original
optimal solution continue to determine the optimal
solution for the problem.
8
Example 1: Olympic Bike Co.
Olympic Bike is introducing two new lightweight

bicycle frames, the Deluxe and the Professional, to be
made from special aluminum and steel alloys. The
anticipated unit profits are $10 for the Deluxe and $15 for
the Professional.
The number of pounds of each alloy needed per
frame is summarized on the next slide.
9
A supplier delivers 100 pounds of the aluminum alloy

and 80 pounds of the steel alloy weekly.
Aluminum Alloy Steel Alloy

Deluxe 2 3
Professional 4 2
How many Deluxe and Professional frames should

Olympic produce each week?
10
 Model Formulation
• Verbal Statement of the Objective Function
Maximize total weekly profit.
• Verbal Statement of the Constraints
Total weekly usage of aluminum alloy < 100 pounds.
Total weekly usage of steel alloy < 80 pounds.
• Definition of the Decision Variables
x1 = number of Deluxe frames produced weekly.
x2 = number of Professional frames produced weekly.
11
 Model Formulation (continued)
Max 10x1 + 15x2 (Total Weekly Profit)
s.t. 2x1 + 4x2 < 100 (Aluminum Available)

3x1 + 2x2 < 80 (Steel Available)
x1, x2 > 0
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
 Partial Spreadsheet Showing Solution
A B C D
6 Decision Variables
7 Deluxe Professional
8 Bikes Made 15 17.500
9
10 Maximized Total Profit 412.500
11
12 Constraints Amount Used Amount Avail.
13 Aluminum 100 <= 100
14 Steel 80 <= 80
27
 Optimal Solution
According to the output:
x1 (Deluxe frames) = 15
x2 (Professional frames) = 17.5
Objective function value = $412.50
28
 Range of Optimality
Question
Suppose the profit on deluxe frames is increased
to $20. Is the above solution still optimal? What is
the value of the objective function when this unit profit
is increased to $20?
29
 Sensitivity Report
Variable Cells
Model Final Reduced Objective Allowable Allowable
Variable Name Value Cost Coefficient Increase Decrease
X1 Deluxe 15.000 0.000 10.000 12.500 2.500
X2 Profes. 17.500 0.000 15.000 5.000 8.333
Constraints
Constraint Final Shadow Constraint Allowable Allowable
Number Name Value Price R.H. Side Increase Decrease
1 Alum. 100.000 3.125 100.000 60.000 46.667
2 Steel 80.000 1.250 80.000 70.000 30.000
30
Answer
The output states that the solution remains optimal
as long as the objective function coefficient of x1 is
between 7.5 and 22.5. Because 20 is within this
range, the optimal solution will not change. The
optimal profit will change: 20x1 + 15x2 = 20(15) +
15(17.5) = $562.50.
31
Question
If the unit profit on deluxe frames were $6
instead of $10, would the optimal solution change?
32
Variable Cells
X1 Deluxe 15.000 0.000 10.000 12.500 2.500
X2 Profes. 17.500 0.000 15.000 5.000 8.333
Constraints
1 Alum. 100.000 3.125 100.000 60.000 46.667
2 Steel 80.000 1.250 80.000 70.000 30.000
33
Answer
The output states that the solution remains
optimal as long as the objective function coefficient of
x1 is between 7.5 and 22.5. Because 6 is outside this
range, the optimal solution would change.
34
QM Solution
X1 X2 RHS Dual
Maximize 10 15
Aluminium 2 4 <= 100 3.13
Steel 3 2 <= 80 1.25
Solution 15 17.5 412.5
Variable Value Reduced Cost Original Val Lower Bound Upper Bound
X1 15 0 10 7.5 22.5
X2 17.5 0 15 6.67 20
Dual Value Slack/Surplus Original Val Lower Bound Upper Bound
Aluminium 3.13 0 100 53.33 160
Steel 1.25 0 80 50 150
35
Simultaneous Changes
 Range of Optimality and 100% Rule

The 100% rule states that simultaneous changes in
objective function coefficients will not change the
optimal solution as long as the sum of the percentages
of the change divided by the corresponding maximum
allowable change in the range of optimality for each
coefficient does not exceed 100%.
36
Question
If simultaneously the profit on Deluxe frames was
raised to $16 and the profit on Professional frames
was raised to $17, would the current solution be
optimal?
37
Answer
If c1 = 16, the amount c1 changed is 16 - 10 = 6 .
The maximum allowable increase is 22.5 - 10 = 12.5,
so this is a 6/12.5 = 48% change. If c2 = 17, the
amount that c2 changed is 17 - 15 = 2. The maximum
allowable increase is 20 - 15 = 5 so this is a 2/5 = 40%
change. The sum of the change percentages is 88%.
Since this does not exceed 100%, the optimal solution
would not change.
38
Simultaneous Changes
 Range of Feasibility and 100% Rule

The 100% rule states that simultaneous changes in
right-hand sides will not change the dual prices as
long as the sum of the percentages of the changes
divided by the corresponding maximum allowable
change in the range of feasibility for each right-hand
side does not exceed 100%.
39
Example 1: Olympic Bike Co. (Revised)
Recall that Olympic Bike is introducing two new

lightweight bicycle frames, the Deluxe and the
Professional, to be made from special aluminum and
steel alloys. The objective is to maximize total profit,
subject to limits on the availability of aluminum and
steel.
Let us now introduce an additional constraint. The
number of Deluxe frames produced (x1) must be greater
than or equal to the number of Professional frames
produced (x2) .
x1 > x2
40
 Model Formulation (continued)
Max 10x1 + 15x2 (Total Weekly Profit)
s.t. 2x1 + 4x2 < 100 (Aluminum Available)

3x1 + 2x2 < 80 (Steel Available)
x1 - x2 > 0 (Product Ratio)
x1, x2 > 0
41
 Sensitivity Report (Revised)
Variable Cells
X1 Deluxe 16.000 0.000 10.000 12.500 10.000
X2 Profes. 16.000 0.000 15.000 1E+30 8.333
Constraints
1 Alum. 96.000 0.000 100.000 1E+30 4.000
2 Steel 80.000 5.000 80.000 3.333 80.000
3 Ratio 0.000 -5.000 0.000 26.667 2.500
42
 Shadow Price for Constraint #3

The interpretation of the shadow price -5.00 is
correctly stated as follows:
“If we are forced to produce 1 more Deluxe frame

over and above the number of Professional frames
produced, total profits will decrease by $5.00.”
43
Example 1: Olympic Bike Co. (Revised Again)
We might instead be interested in what happens if

we change the coefficient on x2.
For instance, what if management required Olympic
to produce a number of Deluxe frames that is at least
110% of the number of Professional frames produced?
In other words, the constraint would change to
x1 > 1.1x2
The dual value does not tell us what will happen in

this case. We need to resolve the problem with this new
constraint.
44
Back to Blending Problem
45
Blending Problem
Ferdinand Feed Company receives four raw

grains from which it blends its dry pet food. The pet
food advertises that each 8-ounce packet meets the
minimum daily requirements for vitamin C, fat
and iron. The cost of each raw grain as well as the
vitamin C, fat, and iron units per pound of each
grain are summarized on the next slide.
46
Blending Problem
Vitamin C Fat Iron

Grain Units/lb Units/lb Units/lb Cost/lb
1 9 12 0 .75
2 16 10 14 .90
3 8 10 15 .80
4 10 8 7 .70
Ferdinand is interested in producing the 8-ounce

mixture at minimum cost while meeting the minimum
daily requirements of 6 units of vitamin C and 5 units of
iron and the maximum of 5 units of fat.
47
Blending Problem
 Define the decision variables
xj = the pounds of grain j (j = 1,2,3,4)

used in the 8-ounce mixture
 Define the objective function
Minimize the total cost for an 8-ounce mixture:

MIN .75x1 + .90x2 + .80x3 + .70x4
48
Blending Problem
 Define the constraints

Total weight of the mix is 8-ounces (.5 pounds):
(1) x1 + x2 + x3 + x4 >= .5
Total amount of Vitamin C in the mix is at least 6 units:
(2) 9x1 + 16x2 + 8x3 + 10x4 >= 6
Total amount of fat in the mix is at most 5 units:
(3) 12x1 + 10x2 + 10x3 + 8x4 <= 5
Total amount of iron in the mix is at least 5 units:
(4) 14x2 + 15x3 + 7x4 >= 5
Non-negativity of variables: xj > 0 for all j
49
Blending Problem
50
Blending Problem
51
Blending Problem
52
QM Solutions
X1 X2 X3 X4 RHS Dual
Minimize 0.75 0.9 0.8 0.7
Weight 1 1 1 1 >= 0.5 -0.4419
Vitamin C 9 16 8 10 >= 6 -0.0145
Fat 12 10 10 8 <= 5 0
Iron 0 14 15 7 >= 5 -0.0161
Solution 0 0.1774 0.0323 0.2903 0.3887
Variable Value Reduced Cost Original Val Lower Bound Upper Bound
X1 0 0.1774 0.75 0.5726 Infinity
X2 0.1774 0 0.9 0.7875 1.1915
X3 0.0323 0 0.8 0.6333 0.9286
X4 0.2903 0 0.7 0.4859 0.7924
Dual Value Slack/Surplus Original Val Lower Bound Upper Bound
Weight -0.4419 0 0.5 0.4286 0.5989
Vitamin C -0.0145 0 6 4.625 6.2857
Fat 0 0.5806 5 4.4194 Infinity
Iron -0.0161 0 5 4.6667 7.25
53
End of Chapter 3
54

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Slides by

 Introduction to Sensitivity Analysis

 In the previous chapter we discussed:

 Sensitivity analysis (or post-optimality analysis) is

 Let us consider how changes in the objective function

 Let us consider how a change in the right-hand side

 Graphically, a dual value is determined by adding +1

 The range of feasibility for a change in the right hand

Olympic Bike is introducing two new lightweight

A supplier delivers 100 pounds of the aluminum alloy

Aluminum Alloy Steel Alloy

How many Deluxe and Professional frames should

 Model Formulation (continued)

Max 10x1 + 15x2 (Total Weekly Profit)

s.t. 2x1 + 4x2 < 100 (Aluminum Available)

 Partial Spreadsheet Showing Solution

According to the output:

 Range of Optimality and 100% Rule

 Range of Optimality and 100% Rule

 Range of Optimality and 100% Rule

 Range of Feasibility and 100% Rule

Recall that Olympic Bike is introducing two new

 Model Formulation (continued)

Max 10x1 + 15x2 (Total Weekly Profit)

s.t. 2x1 + 4x2 < 100 (Aluminum Available)

 Sensitivity Report (Revised)

 Shadow Price for Constraint #3

“If we are forced to produce 1 more Deluxe frame

We might instead be interested in what happens if

The dual value does not tell us what will happen in

Ferdinand Feed Company receives four raw

Vitamin C Fat Iron

Ferdinand is interested in producing the 8-ounce

 Define the decision variables

xj = the pounds of grain j (j = 1,2,3,4)

 Define the objective function

Minimize the total cost for an 8-ounce mixture:

 Define the constraints

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