SENSITIVITY ANALYSIS

In LP, the parameters (input data) of the model can change within certain limits without causing
the optimum solution to change. This is referred to as sensitivity analysis.
In LP models, the parameters are usually not exact. With sensitivity analysis, we can ascertain the
impact of this uncertainty on the quality of the optimum solution. For example, for an estimated
unit profit of a product, if sensitivity analysis reveals that the optimum remains the same for a
±10% change in the unit profit, we can conclude that the solution is more robust than in the case
where the indifference range is only ±1%.
We will start with the more concrete graphical solution to explain the basics of sensitivity analysis.
1. Graphical Sensitivity Analysis
This section demonstrates the general idea of sensitivity analysis. Two cases will be considered:
1. Sensitivity of the optimum solution to changes in the availability of the resources (right-hand
side of the constraints).
2. Sensitivity of the optimum solution to changes in unit profit or unit cost (coefficients of the
objective function).
We will consider the two cases separately, using examples of two-variable graphical LPs.

Uses of Sensitivity Analysis

 The key application of sensitivity analysis is to indicate the sensitivity of simulation to

uncertainties in the input values of the model.
 They help in decision making
 Sensitivity analysis is a method for predicting the outcome of a decision if a situation turns
out to be different compared to the key predictions.
 It helps in assessing the riskiness of a strategy.
 Helps in identifying how dependent the output is on a particular input value. Analyses if
the dependency in turn helps in assessing the risk associated.
 Helps in taking informed and appropriate decisions
 Aids searching for errors in the model

Example 1: Changes in the Right-Hand Side

AYEGBAJEJE produces two products on two machines. A unit of product 1 requires 2 hours on
machine 1 and 1 hour on machine 2. For product 2, a unit requires 1 hour on machine 1 and 3 hours
on machine 2. The revenues per unit of products 1 and 2 are N30 and N20, respectively. The total
daily processing time available for each machine is 8 hours.

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Letting 𝑥1 and 𝑥2 represent the daily number of units of products 1 and 2, respectively, the LP
model is given as
𝑀𝑎𝑥𝑖𝑚𝑢𝑚 𝑧 = 30𝑥1 + 20𝑥2
𝑆. 𝑡 2𝑥1 + 𝑥2 ≤ 8 (Machine 1)
𝑥1 + 3𝑥2 ≤ 8 (Machine 2)
𝑥1 + 𝑥2 ≥ 0
Figure 1: Illustrates the change in the optimum solution when changes are made in the capacity of
machine 1. If the daily capacity is increased from 8 hours to 9 hours, the new optimum will occur
at point G. The rate of change in optimum z resulting from changing machine 1 capacity from 8
hours to 9 hours can be computed as follows:

𝑅𝑎𝑡𝑒 𝑜𝑓 𝑟𝑒𝑣𝑒𝑛𝑢𝑒 𝑐ℎ𝑎𝑛𝑔𝑒

𝑟𝑒𝑠𝑢𝑙𝑡𝑖𝑛𝑔 𝑓𝑟𝑜𝑚 𝑖𝑛𝑐𝑟𝑒𝑎𝑠𝑖𝑛𝑔 𝑧𝐺 − 𝑧𝐶 142 − 128
( )= = = 𝑁14.00/ℎ𝑟
𝑚𝑎𝑐ℎ𝑖𝑛𝑒 1 𝑐𝑎𝑝𝑎𝑐𝑖𝑡𝑦 𝑏𝑦 1 ℎ𝑟 (𝑐𝑎𝑝𝑎𝑐𝑖𝑡𝑦 𝑐ℎ𝑎𝑛𝑔𝑒) 9−8
(𝑝𝑜𝑖𝑛𝑡 𝐶 𝑡𝑜 𝑝𝑜𝑖𝑛𝑡 𝐺)

The computed rate provides a direct link between the model input (resources) and its output (total
revenue) that represents the unit worth of a resource (in N/hr) that is, the change in the optimal
objective value per unit change in the availability of the resource (machine capacity). This means
that a unit increase (decrease) in machine 1 capacity will increase (decrease) revenue by N14.00.
Although unit worth of a resource is an apt description of the rate of change of the objective
function, the technical name dual or shadow price is now standard in the LP literature
FIGURE 3.12
Graphical sensitivity of optimal solution to changes in the availability of resources (right-hand side
of the constraints)

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Looking at Figure 3.12, we can see that the dual price of N14.00/hr remains valid for changes
(increases or decreases) in machine 1 capacity that move its constraint parallel to itself to any point
on the line segment BF. This means that the range of applicability of the given dual price can be
computed as follows:
Minimum machine 1 capacity [𝑎𝑡 𝐵 = (0, 2.67)] = 2 𝑥 0 + 1 𝑥 2.67 = 2.67 ℎ𝑟s
Maximum machine 1 capacity [𝑎𝑡 𝐹 = (8, 0)] = 2 𝑥 8 + 1 𝑥 0 = 16 ℎ𝑟s
We can thus conclude that the dual price of N14.00/hr will remain valid for the range
2.67 hrs ≤ Machine 1 capacity ≤ 16 hrs
Changes outside this range will produce a different dual price (worth per unit).

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Using similar computations, you can verify that the dual price for machine 2 capacity is N2.00/hr
and it remains valid for changes (increases or decreases) that move its constraint parallel to itself
to any point on the line segment DE, which yields the following limits:
Minimum machine 2 capacity [𝑎𝑡 𝐷 = (4, 0)] = 1 𝑥 4 + 3 𝑥 0 = 4 ℎ𝑟s
Maximum machine 2 capacity [𝑎𝑡 𝐸 = (8, 0)] = 1 𝑥 0 + 3 𝑥 8 = 24 ℎ𝑟𝑠
The conclusion is that the dual price of N2.00/hr for machine 2 will remain applicable for the range
4 hrs ≤ Machine 2 capacity ≤ 24 hrs
The computed limits for machine 1 and 2 are referred to as the feasibility ranges.
The dual prices allow making economic decisions about the LP problem, as the following
questions demonstrate:

Question 1. If AYEGBAJEJE can increase the capacity of both machines, which machine should
receive higher priority?
The dual prices for machines 1 and 2 are 𝑁14.00/ℎ𝑟 and 𝑁2.00/ℎ𝑟. This means that each
additional hour of machine 1 will increase revenue by 𝑁14.00, as opposed to only 𝑁2.00 for
machine 2. Thus, priority should be given to machine 1.
Question 2. A suggestion is made to increase the capacities of machines 1 and 2 at the additional
cost of N10/hr. Is this advisable?
For machine 1, the additional net revenue per hour is 14.00 − 10.00 = 𝑁4.00 and for machine
2, the net is 𝑁2.00 − 𝑁10.00 = − 𝑁8.00. Hence, only the capacity of machine 1 should be
increased.
Question 3. If the capacity of machine 1 is increased from the present 8 hours to 13 hours, how
will this increase impact the optimum revenue?
The dual price for machine 1 is N14.00 and is applicable in the range (2.67, 16) hr. The proposed
increase to 13 hours falls within the feasibility range. Hence, the increase in revenue is
𝑁14.00 (13 − 8) = 𝑁70.00, which means that the total revenue will be increased to (current
revenue + change in revenue) = 𝑁128 + 𝑁70 = 𝑁198.00.
Question 4. Suppose that the capacity of machine 1 is increased to 20 hours, how will this in-
crease impact the optimum revenue?
The proposed change is outside the range (2.67, 16) hrs for which the dual price of N14.00 remains
applicable. Thus, we can only make an immediate conclusion regarding an increase up to 16 hours.

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Question 5. We know that the change in the optimum objective value equals (dual price X change
in resource) so long as the change in the resource is within the feasibility range. What about the
associated optimum values of the variables?
The optimum values of the variables will definitely change. However, the level of information we
have from the graphical solution is not sufficient to determine the new values.
Example 2: Changes in the Objective Coefficients
Figure 3.13 shows the graphical solution space of the AYEGBAJEJE problem presented in
Example 1. The optimum occurs at point C (𝑥1 = 3.2, 𝑥2 = 1.6, 𝑧 = 128). Changes in revenue
units (i.e., objective-function coefficients) will change the slope of z. However, as can be seen
from the figure, the optimum solution will remain at point C so long as the objective function lies
between lines BF and DE, the two constraints that define the optimum point. This means that there
is a range for the coefficients of the objective function that will keep the optimum solution un-
changed at C.

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We can write the objective function in the general format
Maximize z = 𝑐1 𝑥1 + 𝑐2 𝑥2
Imagine now that the line z is pivoted at C and that it can rotate clockwise and counterclockwise.
The optimum solution will remain at point C so long as z = 𝑐1 𝑥1 + 𝑐2 𝑥2 lies between the two lines
𝑐
𝑥1 + 3𝑥2 = 8 and 2𝑥1 + 𝑥2 = 8. This means that the ratio 1⁄𝑐2 can vary between 1⁄3
and 2⁄1, which yields the following condition:

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This information can provide immediate answers regarding the optimum solution as the following
questions demonstrate:
Question 1. Suppose that the unit revenues for products 1 and 2 are changed to N35
and N25, respectively. Will the current optimum remain the same?
The new objective function is
𝑀𝑎𝑥𝑖𝑚𝑢𝑚 𝑧 = 35𝑥1 + 25𝑥2
𝐶 35
The solution at 𝐶 will remain optimal because 𝐶1 = 25 = 1.4 remains within the optimality range
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(0.333, 2). When the ratio falls outside this range, additional calculations are needed to find the
new optimum. Notice that although the values of the variables at the optimum point 𝐶 remain
unchanged, the optimum value z changes to 35 𝑥 (3.2) + 25 𝑥 (1.6) = N152
Question 2. Suppose that the unit revenue of product 2 is fixed at its current value of 𝑐2 = N 20.00.
What is the associated range for 𝐶𝑗 , the unit revenue for product 1 that will keep the optimum
unchanged?

This range is referred to as the optimality range for 𝑐1 and it implicitly assumes that 𝑐2 is fixed at
N20.00.

We can similarly determine the optimality range for 𝑐2 by fixing the value of 𝑐1 at N30.00. Thus,