Slides by

John
Loucks
St. Edward’s
University

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 Chapter 8: LP - Sensitivity Analysis
and Interpretation of Solution
 Introduction to Sensitivity Analysis
 Objective Function Coefficients
 Right-Hand Sides
 Limitations of Classical Sensitivity Analysis

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in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
 Introduction to Sensitivity Analysis

 In the previous chapter we discussed:

• objective function value
• values of the decision variables
• 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

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in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
 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.

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in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
 Example 1

 LP Formulation

Max 5x1 + 7x2

s.t. x1 < 6
2x1 + 3x2 < 19
x1 + x2 < 8

x1, x2 > 0

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 Example 1

 Graphical Solution
x2
8 x1 + x2 < 8
Max 5x1 + 7x2
7
6 x1 < 6
5
Optimal Solution:
4 x1 = 5, x2 = 3
3
2x1 + 3x2 < 19
2
1
x1
1 2 3 4 5 6 7 8 9 10
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in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
 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.

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 Example 1

 Changing Slope of Objective Function

x2
Coincides with
8 x1 + x2 < 8
7 constraint line
6 Objective function
5 5 line for 5x1 + 7x2
4 Coincides with
3 Feasible 2x1 + 3x2 < 19
4 constraint line
2 Region
3
1
1 2
x1
1 2 3 4 5 6 7 8 9 10
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in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
 Range of Optimality

 Graphically, the limits of a range of optimality are

found by changing the slope of the objective function
line within the limits of the slopes of the binding
constraint lines.

 If the profit contribution for the variables is outside

this range, a different extreme point and a different
solution will become optimal.

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in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
 Sensitivity Analysis: Computer Solution

Software packages such as LINGO and Microsoft Excel

provide the following LP information:
 Information about the objective function:
• its optimal value
• coefficient ranges (ranges of optimality)
 Information about the decision variables:
• their optimal values
• their reduced costs
 Information about the constraints:
• the amount of slack or surplus
• the dual prices
• right-hand side ranges (ranges of feasibility)

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in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
 Example 1

 Range of Optimality

Variable Cells
Model Final Reduced Objective Allowable Allowable
Variable Name Value Cost Coefficient Increase Decrease
X1 X1 5.000 0.000 5.000 2.000 0.333
X2 X2 3.000 0.000 7.000 0.500 2.000

Constraints
Constraint Final Shadow Constraint Allowable Allowable
Number Name Value Price R.H. Side Increase Decrease
1 1 5.000 0.000 6.000 1E+30 1.000
2 2 19.000 2.000 19.000 5.000 1.000
3 3 8.000 1.000 8.000 0.333 1.667

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in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
 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.
 The range of feasibility is the range over which the
shadow price is applicable.
 As the RHS increases, other constraints will become
binding and limit the change in the value of the
objective function.

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in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
 Shadow Price

 Graphically, a shadow price 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 shadow price for a nonbinding constraint is 0.
 A negative shadow price indicates that the objective
function will not improve if the RHS is increased.

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in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
 Example 1

 Shadow Prices
Constraint 1: Since x1 < 6 is not a binding constraint,
its shadow price is 0.
Constraint 2: Change the RHS value of the second
Constraint to 20 and resolve for the optimal point
determined by the last two constraints:
2x1 + 3x2 = 20 and x1 + x2 = 8.
The solution is x1 = 4, x2 = 4, z = 48. Hence, the
shadow price = znew - zold = 48 - 46 = 2.

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in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
 Example 1

 Shadow Prices
Constraint 3: Change the RHS value of the third
constraint to 9 and resolve for the optimal point
determined by the last two constraints: 2x1 + 3x2 =
19
and x1 + x2 = 9.
The solution is: x1 = 8, x2 = 1, z = 47.
The shadow price is znew - zold = 47 - 46 = 1.

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in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
 Example 1

 Shadow Prices

Variable Cells
Model Final Reduced Objective Allowable Allowable
Variable Name Value Cost Coefficient Increase Decrease
X1 X1 5.000 0.000 5.000 2.000 0.333
X2 X2 3.000 0.000 7.000 0.500 2.000

Constraints
Constraint Final Shadow Constraint Allowable Allowable
Number Name Value Price R.H. Side Increase Decrease
1 1 5.000 0.000 6.000 1E+30 1.000
2 2 19.000 2.000 19.000 5.000 1.000
3 3 8.000 1.000 8.000 0.333 1.667

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in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
 Example 1

 Range of Feasibility

Variable Cells
Model Final Reduced Objective Allowable Allowable
Variable Name Value Cost Coefficient Increase Decrease
X1 X1 5.000 0.000 5.000 2.000 0.333
X2 X2 3.000 0.000 7.000 0.500 2.000

Constraints
Constraint Final Shadow Constraint Allowable Allowable
Number Name Value Price R.H. Side Increase Decrease
1 1 5.000 0.000 6.000 1E+30 1.000
2 2 19.000 2.000 19.000 5.000 1.000
3 3 8.000 1.000 8.000 0.333 1.667

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in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
 Range of Feasibility

 The range of feasibility information provides the limits

where the shadow prices are applicable.

 For changes outside the range, the problem must be

re-solved to find the new shadow price.

 Graphically, the range of feasibility implies that the

same set of binding constraints will remain binding
and hence that the shadow price will accurately
predict what will happen to the optimal objective
function value as the right-hand side is changed.

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in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
 Example 2: 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.

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in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
 Example 2: Olympic Bike Co.

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?

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in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
 Example 2: Olympic Bike Co.

 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.

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in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
 Example 2: Olympic Bike Co.

 Model Formulation (continued)

Max 10x1 + 15x2 (Total Weekly Profit)

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

3x1 + 2x2 < 80 (Steel Available)

x1, x2 > 0

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in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
 Example 2: Olympic Bike Co.

 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

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in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
 Example 2: Olympic Bike Co.

 Optimal Solution
According to the output:

x1 (Deluxe frames) = 15
x2 (Professional frames) = 17.5
Objective function value = $412.50

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in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
 Example 2: Olympic Bike Co.

 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?

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in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
 Example 2: Olympic Bike Co.

 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

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in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
 Example 2: Olympic Bike Co.

 Range of Optimality

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.

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in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
 Example 2: Olympic Bike Co.

 Range of Optimality

Question
If the unit profit on deluxe frames were $6
instead of $10, would the optimal solution change?

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in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
 Example 2: Olympic Bike Co.

 Range of Optimality

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

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in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
 Example 2: Olympic Bike Co.

 Range of Optimality

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.

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in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
 End of Chapter 8

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in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.