Sensitivity Analysis

2.4 The Role of Sensitivity Analysis

of the Optimal Solution
• Is the optimal solution sensitive to changes in
input parameters?

• Possible reasons for asking this question:

• Parameter values used were only best estimates.
• Dynamic environment may cause changes.
• “What-if” analysis may provide economical and
operational information.

2
 Sensitivity Analysis of
Objective Function Coefficients.

• Range of Optimality
• The optimal solution will remain unchanged as long as
• An objective function coefficient lies within its range of optimality
• There are no changes in any other input parameters.

• The value of the objective function will change if the

coefficient multiplies a variable whose value is nonzero.

3
 Change in the objective function
X2
1000 The Plastic constraint
2X1+X2 £ 1000
700
Objective function
Z=8X1+5X2
500

Production Feasible
Time
3X1+4X2£ 2400
X1
500 700

4
 Sensitivity Analysis of
Objective Function Coefficients.
X2
1000
Ma
x8
X1
Range of optimality: [3.75, 10]
+5
X2

Ma
500 x1
Ma 0 X1
x3 +5
.7 5
X1 X2
+5
X2

400 600 800 X1 5

 Sensitivity Analysis of
Objective Function Coefficients.
1000 X2

M
Ma ax 4
x3
.75 X1 +
X 5X
1 +

Ma
5X 2

x8
2

X1
+5
500

X2
Max
2X + 5X
1
2

X1

6
500 800
 Change in the constraint
X2
1000 Mechine 1
Z1=
2X1+X2 £ 1000
Z2=

700
Mechine 2
2X1+X2 £ 1200
500 B
The Plastic constraint
C 2X1+X2 £ 1200
(450,100) G (……)
Production Feasible
Time A D
3X1+4X2£ 2400
X1
500 700

7
 Change in the constraint
X2
Z1=4100
1000 Mechine 1 Z2=4360
2X1+X2 £ 1000

Z=4360-4100=260
700
T=1200-1000=200
Mechine 1
500 B 2X1+X2 £ 1200
(600,0) Marginal T =1.3
C
(320,360) G (480,240)
Production Feasible
Time A D(500,0) F(800,0)
3X1+4X2£ 2400
X1
500 700
The minimum capacity of Mechine 1 in pont B ,Z= (8x 0)+(5x600)=3000 Valid
The maximum capacity of Mechine 1 in pont G, Z= (8x 800)+(5x0)=6400 3000£ Mesin 1£ 6400
 Change in the constraint
X2
Z2=4800
1000 E (1000,0) Mechine 2 Z1=4360
3X1+4X2 £ 3000

Z=4800-4360=440
700 G (100,800)
T=3000-2400=600
Mechine 2
500 B 3X1+4X2 £ 2400
(600,0) Marginal T = 0.73
C
(320,360)
Production Feasible
Time A D(500,0) F(800,0)
2X1+X2£ 1000
X1
500 700
The minimum capacity of Mechine 2 in pont D ,Z= (8x 500)+(5x0)=4000 Valid
The maximum capacity of Mechine 2 in pont G, Z= (8x 0)+(5x1000)=5000 4000£ Mesin 1£ 5000
• Reduced cost
Assuming there are no other changes to the input
parameters, the reduced cost for a variable Xj that has a
value of “0” at the optimal solution is:
• The negative of the objective coefficient increase of the
variable Xj (-DCj) necessary for the variable to be positive
in the optimal solution
• Alternatively, it is the change in the objective value per
unit increase of Xj.
• Complementary slackness
At the optimal solution, either the value of a variable is
zero, or its reduced cost is 0.

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 Sensitivity Analysis of
Right-Hand Side Values

• In sensitivity analysis of right-hand sides of constraints

we are interested in the following questions:
• Keeping all other factors the same, how much would the
optimal value of the objective function (for example, the
profit) change if the right-hand side of a constraint changed
by one unit?
• For how many additional or fewer units will this per unit
change be valid?

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 Sensitivity Analysis of
Right-Hand Side Values
• Any change to the right hand side of a binding
constraint will change the optimal solution.

• Any change to the right-hand side of a non-binding

constraint that is less than its slack or surplus, will
cause no change in the optimal solution.

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 Shadow Prices

• Assuming there are no other changes to the input parameters, the

change to the objective function value per unit increase to a right
hand side of a constraint is called the “Shadow Price”

13
 Shadow Price – graphical demonstration
The Plastic
constraint X2
When more plastic becomes available (the
plastic constraint is relaxed), the right hand
side of the plastic constraint increases.
1000

2X 1
2X 1 Maximum profit = $4360

+1
+1

x 2<
x 2<

=10
Maximum profit = $4363.4
=10

01
500
00

Shadow price =
4363.40 – 4360.00 = 3.40

Production time X1
constraint
500
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 Range of Feasibility

• Assuming there are no other changes to the input parameters, the

range of feasibility is
• The range of values for a right hand side of a constraint, in which the shadow
prices for the constraints remain unchanged.
• In the range of feasibility the objective function value changes as follows:
Change in objective value =
[Shadow price][Change in the right hand side value]

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 Range of Feasibility
The Plastic
constraint X2

Increasing the amount of

2X 1
plastic is only effective until a

+1
1000

x 2<
new constraint becomes active.

=10
Production mix A new active
00
constraint constraint
X1 + X2 £ 700
500
This is an infeasible solution
Production time
constraint

X1

500
16
 Range of Feasibility
The Plastic
constraint X2

2X 1
Note how the profit increases

+1
1000
as the amount of plastic

x 2£
increases.
100
0
500

Production time
constraint

X1

500
17
 Range of Feasibility
X2

Less plastic becomes available (the

1000 plastic constraint is more restrictive).
Infeasible
solution The profit decreases

500
2X1 + 1X2 £ 1100

A new active
constraint
X1

500
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The correct interpretation of shadow prices
• Sunk costs: The shadow price is the value of an extra
unit of the resource, since the cost of the resource is
not included in the calculation of the objective function
coefficient.

• Included costs: The shadow price is the premium value

above the existing unit value for the resource, since the
cost of the resource is included in the calculation of the
objective function coefficient.

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 Other Post - Optimality Changes

• Addition of a constraint.
• Deletion of a constraint.
• Addition of a variable.
• Deletion of a variable.
• Changes in the left - hand side coefficients.

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Range of optimality and 100% Rule
• Question: Will the solution change if the profits on both large and small animals are
increased by $.75? Will the value of the objective function change?
• Answer: If both the profits change by $.75, since the maximum increase for c1 is $1
(from $3 to $4) and the maximum increase in c2 is $1 (from $8 to $9), the overall sum
of the percent changes is (.75/1) + (.75/1) = 75% + 75% = 150%. This total is greater
than 100%; both the optimal solution and the value of the objective function change.

Shadow Price
• Question: The unit profits do not include a per unit labor cost. Given this, what is the
maximum wage Jonni should pay for overtime?
• Answer: Since the unit profits do not include a per unit labor cost, man-hours is a sunk
cost. Thus the shadow price for man-hours gives the maximum worth of man-hours
(overtime). This is found in the zj row in the s1 column (since s1 is the slack for man-
hours) and is $20.
Prime the cannons