i

Lecture Notes on Optimization

Pravin Varaiya
ii
Contents

1 INTRODUCTION 1

2 OPTIMIZATION OVER AN OPEN SET 7

3 Optimization with equality constraints 15

4 Linear Programming 27

5 Nonlinear Programming 49

6 Discrete-time optimal control 75

7 Continuous-time linear optimal control 83

8 Coninuous-time optimal control 95

9 Dynamic programing 121

iii
iv CONTENTS
PREFACE to this edition

Notes on Optimization was published in 1971 as part of the Van Nostrand Reinhold Notes on Sys-
tem Sciences, edited by George L. Turin. Our aim was to publish short, accessible treatments of
graduate-level material in inexpensive books (the price of a book in the series was about five dol-
lars). The effort was successful for several years. Van Nostrand Reinhold was then purchased by a
conglomerate which cancelled Notes on System Sciences because it was not sufficiently profitable.
Books have since become expensive. However, the World Wide Web has again made it possible to
publish cheaply.
Notes on Optimization has been out of print for 20 years. However, several people have been
using it as a text or as a reference in a course. They have urged me to re-publish it. The idea of
making it freely available over the Web was attractive because it reaffirmed the original aim. The
only obstacle was to retype the manuscript in LaTex. I thank Kate Klohe for doing just that.
I would appreciate knowing if you find any mistakes in the book, or if you have suggestions for
(small) changes that would improve it.

Berkeley, California P.P. Varaiya

September, 1998

v
vi CONTENTS
PREFACE

These Notes were developed for a ten-week course I have taught for the past three years to first-year
graduate students of the University of California at Berkeley. My objective has been to present,
in a compact and unified manner, the main concepts and techniques of mathematical programming
and optimal control to students having diverse technical backgrounds. A reasonable knowledge of
advanced calculus (up to the Implicit Function Theorem), linear algebra (linear independence, basis,
matrix inverse), and linear differential equations (transition matrix, adjoint solution) is sufficient for
the reader to follow the Notes.
The treatment of the topics presented here is deep. Although the coverage is not encyclopedic,
an understanding of this material should enable the reader to follow much of the recent technical
literature on nonlinear programming, (deterministic) optimal control, and mathematical economics.
The examples and exercises given in the text form an integral part of the Notes and most readers will
need to attend to them before continuing further. To facilitate the use of these Notes as a textbook,
I have incurred the cost of some repetition in order to make almost all chapters self-contained.
However, Chapter V must be read before Chapter VI, and Chapter VII before Chapter VIII.
The selection of topics, as well as their presentation, has been influenced by many of my students
and colleagues, who have read and criticized earlier drafts. I would especially like to acknowledge
the help of Professors M. Athans, A. Cohen, C.A. Desoer, J-P. Jacob, E. Polak, and Mr. M. Ripper. I
also want to thank Mrs. Billie Vrtiak for her marvelous typing in spite of starting from a not terribly
legible handwritten manuscript. Finally, I want to thank Professor G.L. Turin for his encouraging
and patient editorship.

Berkeley, California P.P. Varaiya

November, 1971

vii
viii CONTENTS
Chapter 1

INTRODUCTION

In this chapter, we present our model of the optimal decision-making problem, illustrate decision-
making situations by a few examples, and briefly introduce two more general models which we
cannot discuss further in these Notes.

1.1 The Optimal Decision Problem

These Notes show how to arrive at an optimal decision assuming that complete information is given.
The phrase complete information is given means that the following requirements are met:

1. The set of all permissible decisions is known, and

2. The cost of each decision is known.

When these conditions are satisfied, the decisions can be ranked according to whether they incur
greater or lesser cost. An optimal decision is then any decision which incurs the least cost among
the set of permissible decisions.
In order to model a decision-making situation in mathematical terms, certain further requirements
must be satisfied, namely,

1. The set of all decisions can be adequately represented as a subset of a vector space with each
vector representing a decision, and

2. The cost corresponding to these decisions is given by a real-valued function.

Some illustrations will help.

Example 1: The Pot Company (Potco) manufacturers a smoking blend called Acapulco Gold.
The blend is made up of tobacco and mary-john leaves. For legal reasons the fraction α of mary-
john in the mixture must satisfy 0 < α < 12 . From extensive market research Potco has determined
their expected volume of sales as a function of α and the selling price p. Furthermore, tobacco can
be purchased at a fixed price, whereas the cost of mary-john is a function of the amount purchased.
If Potco wants to maximize its profits, how much mary-john and tobacco should it purchase, and
what price p should it set?
Example 2: Tough University provides “quality” education to undergraduate and graduate stu-
dents. In an agreement signed with Tough’s undergraduates and graduates (TUGs), “quality” is

1
2 CHAPTER 1. INTRODUCTION

defined as follows: every year, each u (undergraduate) must take eight courses, one of which is a
seminar and the rest of which are lecture courses, whereas each g (graduate) must take two seminars
and five lecture courses. A seminar cannot have more than 20 students and a lecture course cannot
have more than 40 students. The University has a faculty of 1000. The Weary Old Radicals (WORs)
have a contract with the University which stipulates that every junior faculty member (there are 750
of these) shall be required to teach six lecture courses and two seminars each year, whereas every
senior faculty member (there are 250 of these) shall teach three lecture courses and three seminars
each year. The Regents of Touch rate Tough’s President at α points per u and β points per g “pro-
cessed” by the University. Subject to the agreements with the TUGs and WORs how many u’s and
g’s should the President admit to maximize his rating?
Example 3: (See Figure 1.1.) An engineer is asked to construct a road (broken line) connection
point a to point b. The current profile of the ground is given by the solid line. The only requirement
is that the final road should not have a slope exceeding 0.001. If it costs $c per cubic foot to excavate
or fill the ground, how should he design the road to meet the specifications at minimum cost?
Example 4: Mr. Shell is the manager of an economy which produces one output, wine. There
are two factors of production, capital and labor. If K(t) and L(t) respectively are the capital stock
used and the labor employed at time t, then the rate of output of wine W (t) at time is given by the
production function

W (t) = F (K(t), L(t))

As Manager, Mr. Shell allocates some of the output rate W (t) to the consumption rate C(t), and
the remainder I(t) to investment in capital goods. (Obviously, W , C, I, and K are being measured
in a common currency.) Thus, W (t) = C(t) + I(t) = (1 − s(t))W (t) where s(t) = I(t)/W (t)

. b

a .
Figure 1.1: Admissable set of example.

∈ [0, 1] is the fraction of output which is saved and invested. Suppose that the capital stock decays
exponentially with time at a rate δ > 0, so that the net rate of growth of capital is given by the
following equation:

d
K̇(t) = K(t) (1.1)
dt
= −δK(t) + s(t)W (t)
= −δK(t) + s(t)F (K(t), L(t)).

The labor force is growing at a constant birth rate of β > 0. Hence,

1.1. THE OPTIMAL DECISION PROBLEM 3

L̇(t) = βL(t).
(1.2)

Suppose that the production function F exhibits constant returns to scale, i.e., F (λK, λL) =
λF (K, L) for all λ > 0. If we define the relevant variable in terms of per capita of labor, w =
W/L, c = C/L, k = K/l, and if we let f (k) = F (k, l), then we see that F (K, L)−LF (K/L, 1) =
Lf (k), whence the consumption per capita of labor becomes c(t) = (l − s(t))f (k(t)). Using these
definitions and equations (1.1) and (1.2) it is easy to see that K(t) satisfies the differential equation
(1.3).

k̇(t) = s(t)f (k(t)) − µk(t)

(1.3)

where µ = (δ + β). The first term of the right-hand side in (3) is the increase in the capital-to-labor
ratio due to investment whereas the second terms is the decrease due to depreciation and increase in
the labor force.
Suppose there is a planning horizon time T , and at time 0 Mr. Shell starts with capital-to-labor
RT
ratio ko . If “welfare” over the planning period [0, T ] is identified with total consumption 0 c(t)dt,
what should Mr. Shell’s savings policy s(t), 0 ≤ t ≤ T , be so as to maximize welfare? What
savings policy maximizes welfare subject to the additional restriction that the capital-to-labor ratio
R ∞ consumption is discounted at rate α > 0 and if time horizon
at time T should be at least kT ? If future
is ∞, the welfare function becomes 0 e− αt c(t)dt. What is the optimum policy corresponding to
this criterion?
These examples illustrate the kinds of decision-making problems which can be formulated math-
ematically so as to be amenable to solutions by the theory presented in these Notes. We must always
remember that a mathematical formulation is inevitably an abstraction and the gain in precision may
have occurred at a great loss of realism. For instance, Example 2 is caricature (see also a faintly re-
lated but more more elaborate formulation in Bruno [1970]), whereas Example 4 is light-years away
from reality. In the latter case, the value of the mathematical exercise is greater the more insensitive
are the optimum savings policies with respect to the simplifying assumptions of the mathematical
model. (In connection with this example and related models see the critique by Koopmans [1967].)
In the examples above, the set of permissible decisions is represented by the set of all points
in some vector space which satisfy certain constraints. Thus, in the first example, a permissible
decision is any two-dimensional vector (α, p) satisfying the constraints 0 < α < 12 and 0 <
p. In the second example, any vector (u, g) with u ≥ 0, g ≥ 0, constrained by the number
of faculty and the agreements with the TUGs and WORs is a permissible decision. In the last
example, a permissible decision is any real-valued function s(t), 0 ≤ t ≤ T , constrained by
0 ≤ s(t) ≤ 1. (It is of mathematical but not conceptual interest to note that in this case a decision
is represented by a vector in a function space which is infinite-dimensional.) More concisely then,
these Notes are concerned with optimizing (i.e. maximizing or minimizing) a real-valued function
over a vector space subject to constraints. The constraints themselves are presented in terms of
functional inequalities or equalities.
4 CHAPTER 1. INTRODUCTION

At this point, it is important to realize that the distinction between the function which is to be
optimized and the functions which describe the constraints, although convenient for presenting the
mathematical theory, may be quite artificial in practice. For instance, suppose we have to choose
the durations of various traffic lights in a section of a city so as to achieve optimum traffic flow.
Let us suppose that we know the transportation needs of all the people in this section. Before we
can begin to suggest a design, we need a criterion to determine what is meant by “optimum traffic
flow.” More abstractly, we need a criterion by which we can compare different decisions, which in
this case are different patterns of traffic-light durations. One way of doing this is to assign as cost to
each decision the total amount of time taken to make all the trips within this section. An alternative
and equally plausible goal may be to minimize the maximum waiting time (that is the total time
spent at stop lights) in each trip. Now it may happen that these two objective functions may be
inconsistent in the sense that they may give rise to different orderings of the permissible decisions.
Indeed, it may be the case that the optimum decision according to the first criterion may be lead to
very long waiting times for a few trips, so that this decision is far from optimum according to the
second criterion. We can then redefine the problem as minimizing the first cost function (total time
for trips) subject to the constraint that the waiting time for any trip is less than some reasonable
bound (say one minute). In this way, the second goal (minimum waiting time) has been modified
and reintroduced as a constraint. This interchangeability of goal and constraints also appears at a
deeper level in much of the mathematical theory. We will see that in most of the results the objective
function and the functions describing the constraints are treated in the same manner.

1.2 Some Other Models of Decision Problems

Our model of a single decision-maker with complete information can be generalized along two
very important directions. In the first place, the hypothesis of complete information can be relaxed
by allowing that decision-making occurs in an uncertain environment. In the second place, we
can replace the single decision-maker by a group of two or more agents whose collective decision
determines the outcome. Since we cannot study these more general models in these Notes, we
merely point out here some situations where such models arise naturally and give some references.

1.2.1 Optimization under uncertainty.

A person wants to invest $1,000 in the stock market. He wants to maximize his capital gains, and
at the same time minimize the risk of losing his money. The two objectives are incompatible, since
the stock which is likely to have higher gains is also likely to involve greater risk. The situation
is different from our previous examples in that the outcome (future stock prices) is uncertain. It is
customary to model this uncertainty stochastically. Thus, the investor may assign probability 0.5 to
the event that the price of shares in Glamor company increases by $100, probability 0.25 that the
price is unchanged, and probability 0.25 that it drops by $100. A similar model is made for all the
other stocks that the investor is willing to consider, and a decision problem can be formulated as
follows. How should $1,000 be invested so as to maximize the expected value of the capital gains
subject to the constraint that the probability of losing more than $100 is less than 0.1?
As another example, consider the design of a controller for a chemical process where the decision
variable are temperature, input rates of various chemicals, etc. Usually there are impurities in the
chemicals and disturbances in the heating process which may be regarded as additional inputs of a
1.2. SOME OTHER MODELS OF DECISION PROBLEMS 5

random nature and modeled as stochastic processes. After this, just as in the case of the portfolio-
selection problem, we can formulate a decision problem in such a way as to take into account these
random disturbances.
If the uncertainties are modelled stochastically as in the example above, then in many cases
the techniques presented in these Notes can be usefully applied to the resulting optimal decision
problem. To do justice to these decision-making situations, however, it is necessary to give great
attention to the various ways in which the uncertainties can be modelled mathematically. We also
need to worry about finding equivalent but simpler formulations. For instance, it is of great signif-
icance to know that, given appropriate conditions, an optimal decision problem under uncertainty
is equivalent to another optimal decision problem under complete information. (This result, known
as the Certainty-Equivalence principle in economics has been extended and baptized the Separation
Theorem in the control literature. See Wonham [1968].) Unfortunately, to be able to deal with
these models, we need a good background in Statistics and Probability Theory besides the material
presented in these Notes. We can only refer the reader to the extensive literature on Statistical De-
cision Theory (Savage [1954], Blackwell and Girshick [1954]) and on Stochastic Optimal Control
(Meditch [1969], Kushner [1971]).

1.2.2 The case of more than one decision-maker.

Agent Alpha is chasing agent Beta. The place is a large circular field. Alpha is driving a fast, heavy
car which does not maneuver easily, whereas Beta is riding a motor scooter, slow but with good
maneuverability. What should Alpha do to get as close to Beta as possible? What should Beta
do to stay out of Alpha’s reach? This situation is fundamentally different from those discussed so
far. Here there are two decision-makers with opposing objectives. Each agent does not know what
the other is planning to do, yet the effectiveness of his decision depends crucially upon the other’s
decision, so that optimality cannot be defined as we did earlier. We need a new concept of rational
(optimal) decision-making. Situations such as these have been studied extensively and an elaborate
structure, known as the Theory of Games, exists which describes and prescribes behavior in these
situations. Although the practical impact of this theory is not great, it has proved to be among the
most fruitful sources of unifying analytical concepts in the social sciences, notably economics and
political science. The best single source for Game Theory is still Luce and Raiffa [1957], whereas
the mathematical content of the theory is concisely displayed in Owen [1968]. The control theorist
will probably be most interested in Isaacs [1965], and Blaquiere, et al., [1969].
The difficulty caused by the lack of knowledge of the actions of the other decision-making agents
arises even if all the agents have the same objective, since a particular decision taken by our agent
may be better or worse than another decision depending upon the (unknown) decisions taken by the
other agents. It is of crucial importance to invent schemes to coordinate the actions of the individual
decision-makers in a consistent manner. Although problems involving many decision-makers are
present in any system of large size, the number of results available is pitifully small. (See Mesarovic,
et al., [1970] and Marschak and Radner [1971].) In the author’s opinion, these problems represent
one of the most important and challenging areas of research in decision theory.
6 CHAPTER 1. INTRODUCTION
Chapter 2

OPTIMIZATION OVER AN OPEN

SET

In this chapter we study in detail the first example of Chapter 1. We first establish some notation
which will be in force throughout these Notes. Then we study our example. This will generalize
to a canonical problem, the properties of whose solution are stated as a theorem. Some additional
properties are mentioned in the last section.

2.1 Notation
2.1.1
All vectors are column vectors, with two consistent exceptions mentioned in 2.1.3 and 2.1.5 below
and some other minor and convenient exceptions in the text. Prime denotes transpose so that if
x ∈ Rn then x0 is the row vector x0 = (x1 , . . . , xn ), and x = (x1 , . . . , xn )0 . Vectors are normally
denoted by lower case letters, the ith component of a vector x ∈ Rn is denoted xi , and different
vectors denoted by the same symbol are distinguished by superscripts as in xj and xk . 0 denotes
both the zero vector and the real number zero, but no confusion will result.
Thus if x = (x1 , . . . , xn )0 and y = (y1 , . . . , yn )0√then x0 y = x1 y1 + . . . + xn yn as in ordinary
matrix multiplication. If x ∈ Rn we define |x| = + x0 x.

2.1.2
If x = (x1 , . . . , xn )0 and y = (y1 , . . . , yn )0 then x ≥ y means xi ≥ yi , i = 1, . . . , n. In particular if
x ∈ Rn , then x ≥ 0, if xi ≥ 0, i = 1, . . . , n.

2.1.3
Matrices are normally denoted by capital letters. If A is an m × n matrix, then Aj denotes the jth
column of A, and Ai denotes the ith row of A. Note that Ai is a row vector. Aji denotes the entry
of A in the ith row and jth column; this entry is sometimes also denoted by the lower case letter
aij , and then we also write A = {aij }. I denotes the identity matrix; its size will be clear from the
context. If confusion is likely, we write In to denote the n × n identity matrix.

7
8 CHAPTER 2. OPTIMIZATION OVER AN OPEN SET

2.1.4
If f : Rn → Rm is a function, its ith component is written fi , i = 1, . . . , m. Note that fi : Rn → R.
Sometimes we describe a function by specifying a rule to calculate f (x) for every x. In this case
we write f : x 7→ f (x). For example, if A is an m × n matrix, we can write F : x 7→ Ax to denote
the function f : Rn → Rm whose value at a point x ∈ Rn is Ax.

2.1.5
If f : Rn 7→ R is a differentiable function, the derivative of f at x̂ is the row vector ((∂f /∂x1 )(x̂), . . . , (∂f /∂xn )(x̂)).
This derivative is denoted by (∂f /∂x)(x̂) or fx (x̂) or ∂f /∂x|x=x̂ or fx |x=x̂ , and if the argument x̂
is clear from the context it may be dropped. The column vector (fx (x̂))0 is also denoted ∇x f (x̂),
and is called the gradient of f at x̂. If f : (x, y) 7→ f (x, y) is a differentiable function from
Rn × Rm into R, the partial derivative of f with respect to x at the point (x̂, ŷ) is the n-dimensional
row vector fx (x̂, ŷ) = (∂f /∂x)(x̂, ŷ) = ((∂f /∂x1 )(x̂, ŷ), . . . , (∂f /∂xn )(x̂, ŷ)), and similarly
fy (x̂, ŷ) = (∂f /∂y)(x̂, ŷ) = ((∂f /∂y1 )(x̂, ŷ), . . . , (∂f /∂ym )(x̂, ŷ)). Finally, if f : Rn → Rm is
a differentiable function with components f1 , . . . , fm , then its derivative at x̂ is the m × n matrix

 
f1x (x̂)
∂f  .. 
(x̂) = fx x̂ =  . 
∂x
fmx (x̂)
 
∂f1
(x̂) . . . ∂f1
∂xn (x̂)
 ∂x1. 
= 

.. ..
. 

...
∂fm ∂fm
∂x1 (x̂) ∂xn (x̂)

2.1.6
If f : Rn → R is twice differentiable, its second derivative at x̂ is the n×n matrix (∂ 2 f /∂x∂x)(x̂) =
fxx (x̂) where (fxx (x̂))ji = (∂ 2 f /∂xj ∂xi )(x̂). Thus, in terms of the notation in Section 2.1.5 above,
fxx (x̂) = (∂/∂x)(fx )0 (x̂).

2.2 Example
We consider in detail the first example of Chapter 1. Define the following variables and functions:

α = fraction of mary-john in proposed mixture,

p = sale price per pound of mixture,
v = total amount of mixture produced,
f (α, p) = expected sales volume (as determined by market research) of mixture as a function of(α, p).
2.2. EXAMPLE 9

Since it is not profitable to produce more than can be sold we must have:

v = f (α, p),
m = amount (in pounds) of mary-john purchased, and
t = amount (in pounds) of tobacco purchased.

Evidently,

m = αv, and
t = (l − α)v.

Let

P1 (m) = purchase price of m pounds of mary-john, and

P2 = purchase price per pound of tobacco.

Then the total cost as a function of α, p is

C(α, p) = P1 (αf (α, p)) + P2 (1 − α)f (α, p).

The revenue is

R(α, p) = pf (α, p),

so that the net profit is

N (α, p) = R(α, p) − C(α, p).

The set of admissible decisions is Ω, where Ω = {(α, p)|0 < α < 12 , 0 < p < ∞}. Formally, we
have the the following decision problem:

Maximize N (α, p),

subject to (α, p) ∈ Ω.

Suppose that (α∗ , p∗) is an optimal decision, i.e.,

(α∗ , p∗ ) ∈ Ω and
(2.1)
N (α∗ , p∗ ) ≥ N (α, p) for all (α, p) ∈ Ω.

We are going to establish some properties of (a∗ , p∗ ). First of all we note that Ω is an open subset
of R2 . Hence there exits ε > 0 such that

(α, p) ∈ Ω whenever |(α, p) − (α∗ , p∗ )| < ε (2.2)

In turn (2.2) implies that for every vector h = (h1 , h2 )0 in R2 there exists η > 0 (η of course
depends on h) such that

((α∗ , p∗ ) + δ(h1 , h2 )) ∈ Ω for 0 ≤ δ ≤ η (2.3)

10 CHAPTER 2. OPTIMIZATION OVER AN OPEN SET

1
2
(α∗ , p∗ ) + δ(h1 , h2 )

.
Ω (a∗ , p∗ )

δh
h
|
p

Figure 2.1: Admissable set of example.

Combining (2.3) with (2.1) we obtain (2.4):

N (α∗ , p∗ ) ≥ N (α∗ + δh1 , p∗ + δh2 ) for 0 ≤ δ ≤ η (2.4)

Now we assume that the function N is differentiable so that by Taylor’s theorem

N (α∗ , p∗ )
∗ ∗ ∗ ∗
N (α∗ + δh1 , p∗ + δh2 ) = +δ[ ∂N
∂α (δ , p )h1 + ∂p (α , p )h2 ]
∂N
(2.5)
+o(δ),

where
oδ
δ → 0 as δ → 0. (2.6)

Substitution of (2.5) into (2.4) yields

0 ≥ δ[ ∂N ∗ ∗ ∗ ∗
∂α (α , p )h1 + ∂p (α , p )h2 ] + o(δ).
∂N

Dividing by δ > 0 gives

0 ≥ [ ∂N ∗ ∗ ∗ ∗ o(δ)
∂α (α , p )h1 + ∂p (α , p )h2 ] +
∂N (2.7)
δ .

Letting δ approach zero in (2.7), and using (2.6) we get

0 ≥ [ ∂N ∗ ∗ ∗ ∗
∂α (α , p )h1 + ∂p (α , p )h2 ].
∂N
(2.8)

Thus, using the facts that N is differentiable, (α∗ , p∗ ) is optimal, and δ is open, we have concluded
that the inequality (2.9) holds for every vector h ∈ R2 . Clearly this is possible only if
∗ ∗ ∗ ∗
∂p (α , p ) = 0.
∂N
∂α (α , p ) = 0,
∂N
(2.9)

Before evaluating the usefulness of property (2.8), let us prove a direct generalization.
2.3. THE MAIN RESULT AND ITS CONSEQUENCES 11

2.3 The Main Result and its Consequences

2.3.1 Theorem
.
Let Ω be an open subset of Rn . Let f : Rn → R be a differentiable function. Let x∗ be an optimal
solution of the following decision-making problem:

Maximize f (x)
(2.10)
subject to x ∈ Ω.

Then
∂f ∗
∂x (x ) = 0. (2.11)

Proof: Since x∗ ∈ Ω and Ω is open, there exists ε > 0 such that

x ∈ Ω whenever |x − x∗ | < ε. (2.12)

In turn, (2.12) implies that for every vector h ∈ Rn there exits η > 0 (η depending on h) such that

(x∗ + δh) ∈ Ω whenever 0 ≤ δ ≤ η. (2.13)

Since x∗ is optimal, we must then have

f (x∗ ) ≥ f (x∗ + δh) whenever 0 ≤ δ ≤ η. (2.14)

Since f is differentiable, by Taylor’s theorem we have

f (x∗ + δh) = f (x∗ ) + ∂f ∗

∂x (x )δh + o(δ), (2.15)

where

→ 0 as δ → 0
o(δ)
δ
(2.16)

Substitution of (2.15) into (2.14) yields

0 ≥ δ ∂f ∗
∂x (x )h + o(δ)

and dividing by δ > 0 gives

0≥ ∂f ∗ o(δ)
∂x (x )h + δ
(2.17)

Letting δ approach zero in (2.17) and taking (2.16) into account, we see that

0≥ ∂f ∗
∂x (x )h,
(2.18)

Since the inequality (2.18) must hold for every h ∈ Rn , we must have

0= ∂f ∗
∂x (x ),

and the theorem is proved. ♦

12 CHAPTER 2. OPTIMIZATION OVER AN OPEN SET

Table 2.1
Does there exist At how many points
an optimal deci- in Ω is 2.2.2 Further
Case sion for 2.2.1? satisfied? Consequences
1 Yes Exactly one point, x∗ is the
say x∗ unique optimal
2 Yes More than one point
3 No None
4 No Exactly one point
5 No More than one point

2.3.2 Consequences.
Let us evaluate the usefulness of (2.11) and its special case (2.18). Equation (2.11) gives us n
equations which must be satisfied at any optimal decision x∗ = (x∗1 , . . . , x∗n )0 .
These are
∂f ∗ ∂f ∗ ∂f ∗
∂x1 (x ) = 0, ∂x2 (x ) = 0, . . . , ∂xn (x ) =0 (2.19)

Thus, every optimal decision must be a solution of these n simultaneous equations of n variables, so
that the search for an optimal decision from Ω is reduced to searching among the solutions of (2.19).
In practice this may be a very difficult problem since these may be nonlinear equations and it may
be necessary to use a digital computer. However, in these Notes we shall not be overly concerned
with numerical solution techniques (but see 2.4.6 below).
The theorem may also have conceptual significance. We return to the example and recall the
N = R − C. Suppose that R and C are differentiable, in which case (2.18) implies that at every
optimal decision (α∗ , p∗ )

∗ ∗ ∗ ∗ ∗ ∗ ∗ ∗
∂p (α , p ) = ∂p (α , p ),
∂R ∂C
∂α (α , p ) = ∂α (α , p ),
∂R ∂C

or, in the language of economic analysis, marginal revenue = marginal cost. We have obtained an
important economic insight.

2.4 Remarks and Extensions

2.4.1 A warning.
Equation (2.11) is only a necessary condition for x∗ to be optimal. There may exist decisions x̃ ∈ Ω
such that fx (x̃) = 0 but x̃ is not optimal. More generally, any one of the five cases in Table 2.1 may
occur. The diagrams in Figure 2.1 illustrate these cases. In each case Ω = (−1, 1).
Note that in the last three figures there is no optimal decision since the limit points -1 and +1 are
not in the set of permissible decisions Ω = (−1, 1). In summary, the theorem does not give us any
clues concerning the existence of an optimal decision, and it does not give us sufficient conditions
either.
2.4. REMARKS AND EXTENSIONS 13

-1 Case 1 1 -1 Case 2 1 -1 Case 3 1

-1 1 -1 1
Case 4 Case 5

Figure 2.2: Illustration of 4.1.

2.4.2 Existence.
If the set of permissible decisions Ω is a closed and bounded subset of Rn , and if f is continuous,
then it follows by the Weierstrass Theorem that there exists an optimal decision. But if Ω is closed
we cannot assert that the derivative of f vanishes at the optimum. Indeed, in the third figure above,
if Ω = [−1, 1], then +1 is the optimal decision but the derivative is positive at that point.

2.4.3 Local optimum.

We say that x∗ ∈ Ω is a locally optimal decision if there exists ε > 0 such that f (x∗ ) ≥ f (x)
whenever x ∈ Ω and |x∗ − x| ≤ ε. It is easy to see that the theorem holds (i.e., 2.11) for local
optima also.

2.4.4 Second-order conditions.

Suppose f is twice-differentiable and let x∗ ∈ Ω be optimal or even locally optimal. Then fx (x∗ ) =
0, and by Taylor’s theorem
f (x∗ + δh) = f (x∗ ) + 12 δ2 h0 fxx (x∗ )h + o(δ2 ), (2.20)
2
)
where o(δ
δ2
→ 0 as δ → 0. Now for δ > 0 sufficiently small f (x∗ + δh) ≤ f (x∗ ), so that dividing
by δ2 > 0 yields
o(δ2 )
0 ≥ 12 h0 fxx (x∗ )h + δ2

and letting δ approach zero we conclude that h0 fxx (x∗ )h ≤ 0 for all h ∈ Rn . This means that
fxx (x∗ ) is a negative semi-definite matrix. Thus, if we have a twice differentiable objective function,
we get an additional necessary condition.

2.4.5 Sufficiency for local optimal.

Suppose at x∗ ∈ Ω, fx (x∗ ) = 0 and fxx is strictly negative definite. But then from the expansion
(2.20) we can conclude that x∗ is a local optimum.
14 CHAPTER 2. OPTIMIZATION OVER AN OPEN SET

2.4.6 A numerical procedure.

At any point x̃ ∈ Ω the gradient 5x f (x̃) is a direction along which f (x) increases, i.e., f (x̃ + ε 5x
f (x̃)) > f (x̃) for all ε > 0 sufficiently small. This observation suggests the following scheme for
finding a point x∗ ∈ Ω which satisfies 2.11. We can formalize the scheme as an algorithm.
Step 1. Pick x0 ∈ Ω. Set i = 0. Go to Step 2.
Step 2. Calculate 5x f (xi ). If 5x f (xi ) = 0, stop.
Otherwise let xi+1 = xi + di 5x f (xi ) and go
to Step 3.
Step 3. Set i = i + 1 and return to Step 2.
The step size di can be selected in many ways. For instance, one choice is to take di to be an
optimal decision for the following problem:

Max{f (xi + d 5x f (xi ))|d > 0, (xi + d 5x f (xi )) ∈ Ω}.

This requires a one-dimensional search. Another choice is to let di = di−1 if f (xi + di−1 5x
f (xi )) > f (xi ); otherwise let di = 1/k di−1 where k is the smallest positive integer such that
f (xi + 1/k di−1 5x f (xi )) > f (xi ). To start the process we let d−1 > 0 be arbitrary.

Exercise: Let f be continuous differentiable. Let {di } be produced by either of these choices and
let
{xi } be the resulting sequence. Then

1. f (xi+1 ) > f (xi ) if xi+1 6= xi , i

2. if x∗ ∈ Ω is a limit point of the sequence {xi }, fx (x∗ ) = 0.

For other numerical procedures the reader is referred to Zangwill [1969] or Polak [1971].
Chapter 3

OPTIMIZATION OVER SETS

DEFINED BY EQUALITY
CONSTRAINTS

We first study a simple example and examine the properties of an optimal decision. This will
generalize to a canonical problem, and the properties of its optimal decisions are stated in the form
of a theorem. Additional properties are summarized in Section 3 and a numerical scheme is applied
to determine the optimal design of resistive networks.

3.1 Example
We want to find the rectangle of maximum area inscribed in an ellipse defined by
x2 y2
f1 (x, y) = a2 + b2 = α. (3.1)

The problem can be formalized as follows (see Figure 3.1):

Maximize f0 (x, y) = 4xy

(3.2)
subject to (x, y) ∈ Ω = {(x, y)|f1 (x, y) = α}.

The main difference between problem (3.2) and the decisions studied in the last chapter is that
the set of permissible decisions Ω is not an open set. Hence, if (x∗ , y ∗ ) is an optimal decision we
cannot assert that f0 (x∗ , y ∗ ) ≥ f0 (x, y) for all (x, y) in an open set containing (x∗ , y ∗ ). Returning
to problem (3.2), suppose (x∗ , y ∗ ) is an optimal decision. Clearly then either x∗ 6= 0 or y ∗ 6= 0. Let
us suppose y ∗ 6= 0. Then from figure 3.1 it is evident that there exist (i)ε > 0, (ii) an open set V
containing (x∗ , y ∗ ), and (iii) a differentiable function g : (x∗ − ε, x∗ + ε) → V such that

f1 (x, y) = α and (x, y) ∈ V iff f y = g(x).1 (3.3)

In particular this implies that y ∗ = g(x∗ ), and that f1 (x, g(x)) = α whenever |x − x∗ | < ε. Since
1
Note that y ∗ 6= 0 implies f1y (x∗ , Y ∗ ) 6= 0, so that this assertion follows from the Implicit Function Theorem. The
assertion is false if y ∗ = 0. In the present case let 0 < ε ≤ a − x∗ and g(x) = +b[α − (x/a)2 ]1/2 .

15
16 CHAPTER 3. OPTIMIZATION WITH EQUALITY CONSTRAINTS

Tangent plane to
Ω at (x∗ , y ∗ )

(f1x , f1y )

y∗ - V
g(x)


( | )
x∗ x
Ω

Figure 3.1: Illustration of example.

(x∗ , y ∗ ) = (x∗ , g(x∗ )) is optimum for (3.2), it follows that x∗ is an optimal solution for (3.4):

Maximize fˆ0 (x) = f0 (x, g(x))

(3.4)
subject to |x − x∗ | < ε.

But the constraint set in (3.4) is an open set (in R1 ) and the objective function fˆ0 is differentiable,
so that by Theorem 2.3.1, fˆ0x (x∗ ) = 0, which we can also express as

f0x (x∗ , y ∗ ) + f0y (x∗ , y ∗ )gx (x∗ ) = 0 (3.5)

Using the fact that f1 (x, g(x)) ≡ α for |x − x∗ | < ε, we see that

f1x (x∗ , y ∗ ) + f1y (x∗ , y ∗ )gx (x∗ ) = 0,

and since f1y (x∗ , y ∗ ) 6= 0 we can evaluate gx (x∗ ),

−1
gx (x∗ ) = −f1y f1x (x∗ , y ∗ ),

and substitute in (3.5) to obtain the condition (3.6):

−1
f0x − f0y f1y f1x = 0 at (x∗ , y ∗ ). (3.6)

Thus an optimal decision (x∗ , y ∗ ) must satisfy the two equations f1 (x∗ , y ∗ ) = α and (3.6). Solving
these yields
+ +
x∗ = − (α/2)
1/2
a , y∗ = − (α/2)
1/2
b.
3.2. GENERAL CASE 17

+
Evidently there are two optimal decisions, (x∗ , y ∗ ) = − (α/2)
1/2 (a, b), and the maximum area is

m(α) = 2αab. (3.7)

The condition (3.6) can be interpreted differently. Define

−1 ∗ ∗
λ∗ = f0y f1y (x , y ). (3.8)

Then (3.6) and (3.8) can be rewritten as (3.9):

(f0x , f0y ) = λ∗ (f1x , f1y ) at (x∗ , y ∗ ) (3.9)

In terms of the gradients of f0 , f1 , (3.9) is equivalent to

5f0 (x∗ , y ∗ ) = [5f1 (x∗ , y ∗ )]λ∗ , (3.10)

which means that at an optimal decision the gradient of the objective function f0 is normal to the
plane tangent to the constraint set Ω.
Finally we note that

λ∗ = ∂m
∂α . (3.11)

where m(α) = maximum area.

3.2 General Case

3.2.1 Theorem.
Let fi : Rn → R, i = 0, 1, . . . , m (m < n), be continuously differentiable functions and let x∗ be
an optimal decision of problem (3.12):

Maximize f0 (x)
(3.12)
subject to fi (x) = αi , i = 1, . . . , m.

Suppose that at x∗ the derivatives fix (x∗ ), i = 1, . . . , m, are linearly independent. Then there exists
a vector λ∗ = (λ∗1 , . . . , λ∗m )0 such that

f0x (x∗ ) = λ∗1 f1x (x∗ ) + . . . + λ∗m fmx (x∗ ) (3.13)

Furthermore, let m(α1 , . . . , αm ) be the maximum value of (3.12) as a function of α = (α1 , . . . , αm )0 .

Let x∗ (α) be an optimal decision for (3.12). If x∗ (α) is a differentiable function of α then m(α) is
a differentiable function of α, and

(λ∗ )0 = ∂m
∂α (3.14)

Proof. Since fix (x∗ ), i = 1, . . . , m, are linearly independent, then by re-labeling the coordinates of
x if necessary, we can assume that the m × m matrix [(∂fi /∂xj )(x∗ )], 1 ≤ i, j ≤ m, is nonsingular.
By the Implicit Function Theorem (see Fleming [1965]) it follows that there exist (i) ε > 0, (ii) an
18 CHAPTER 3. OPTIMIZATION WITH EQUALITY CONSTRAINTS

open set V in Rn containing x∗ , and (iii) a differentiable function g : U → Rm , where U =

[(xm+1 , . . . , xn )]| |xm+` − x∗m+` | < ε, ` = 1, . . . , n − m], such that

fi (x1 , . . . , xn ) = αi , 1 ≤ i ≤ m, and (x1 , . . . , xn ) ∈ V

iff

xj = gj (xm+1 , . . . , xn ), 1 ≤ j ≤ m, and (xm+1 , . . . , xn ) ∈ U (3.15)

(see Figure 3.2).

In particular this implies that x∗j = gj (x∗m+1 , . . . , x∗n ), 1 ≤ j ≤ m, and

fi (g(xm+1 , . . . , xn ), xm+1 , . . . , xn ) = αi , i = 1, . . . , m. (3.16)

For convenience, let us define w = (x1 , . . . , xm )0 , u = (xm+1 , . . . , xn )0 and f = (f1 , . . . , fm )0 .

Then, since x∗ = (w∗ , u∗ ) = (g(u∗ ), u∗ ) is optimal for (3.12), it follows that u∗ is an optimal
decision for (3.17):

Maximize fˆ0 (u) = f0 (g(u), u)

(3.17)
subject to u ∈ U.

But U is an open subset of Rn−m and fˆ0 is a differentiable function on U (since f0 and g are
differentiable), so that by Theorem 2.3.1 , fˆ0u (u∗ ) = 0, which we can also express using the chain
rule for derivatives as

fˆ0u (u∗ ) = f0w (x∗ )gu (u∗ ) + f0u (x∗ ) = 0. (3.18)

Differentiating (3.16) with respect to u = (xm+1 , . . . , xn )0 , we see that

fw (x∗ )gu (u∗ ) + fu (x∗ ) = 0,

and since the m × m matrix fw (x∗ ) is nonsingular we can evaluate gu (u∗ ),

gu (u∗ ) = −[fw (x∗)]−1 fu (x∗ ),

and substitute in (3.18) to obtain the condition

−f0w fw−1 fu + f0u = 0 at x∗ = (w∗ , u∗ ). (3.19)

Next, define the m-dimensional column vector λ∗ by

(λ∗ )0 = f0w fw−1 |x∗ . (3.20)

Then (3.19) and (3.20) can be written as (3.21):

(f0w (x∗ ), f0u (x∗ )) = (λ∗ )0 (fw (x∗ ), fu (x∗ )). (3.21)

Since x = (w, u), this is the same as

f0x (x∗ ) = (λ∗ )0 fx (x∗ ) = λ∗1 f1x (x∗ ) + . . . + λ∗m fmx (x∗ ),
3.2. GENERAL CASE 19

x1 , . . . , x m

g(xm+1 , . . . , xn )
(x∗1 , . . . , x∗m ) .x . ∗ V

Ω=
{x|f i (x) = αi }
i = 1, . . . , m

xm+1

U
. . (xm+1 , . . . , xn )
(x∗m+1 , . . . , x∗n )
xn
2

Figure 3.2: Illustration of theorem.

which is equation (3.13).

To prove (3.14), we vary α in a neighborhood of a fixed value, say α. We define w∗ (α) =
(x∗1 (α), . . . , x∗m (α))0 and u∗ (α) = (x∗m+1 (α), . . . , x∗( α))0 . By hypothesis, fw is nonsingular at
x∗ (α). Since f (x) and x∗ (α) are continuously differentiable by hypothesis, it follows that fw is
nonsingular at x∗ (α) in a neighborhood of α, say N . We have the equation

f (w∗ (α), u∗ (α)) = α, (3.22)

−f0w fw−1 fu + f0u = 0 at (w∗ (α), u∗ (α)), (3.23)

for α ∈ N . Also, m(α) = f0 (x∗ (α)), so that

mα = f0w wα∗ + f0u u∗α (3.24)

Differentiating (3.22) with respect to α gives

fw wα∗ + fu u∗α = I,

so that

wα∗ + fw−1 fu u∗α = fw−1 ,

20 CHAPTER 3. OPTIMIZATION WITH EQUALITY CONSTRAINTS

and multiplying on the left by f0w gives

f0w wα∗ + f0w fw−1 fu u∗α = f0w fw−1 .

Using (3.23), this equation can be rewritten as

f0w wα∗ + f0u u∗α = f0w fw−1 . (3.25)

In (3.25), if we substitute from (3.20) and (3.24), we obtain (3.14) and the theorem is proved. ♦

3.2.2 Geometric interpretation.

The equality constraints of the problem in 3.12 define a n − m dimensional surface

Ω = {x|fi (x) = αi , i = 1, . . . , m}.

The hypothesis of linear independence of {fix (x∗ )|1 ≤ i ≤ m} guarantees that the tangent plane
through Ω at x∗ is described by

{h|fix (x∗ )h = 0 , i = 1, . . . , m}, (3.26)

so that the set of (column vectors orthogonal to this tangent surface is

{λ1 5x f1 (x∗ ) + . . . + λm 5x fm (x∗ )|λi ∈ R, i = 1, . . . , m}.

Condition (3.13) is therefore equivalent to saying that at an optimal decision x∗ , the gradient of the
objective function 5x f0 (x∗ ) is normal to the tangent surface (3.12).

3.2.3 Algebraic interpretation.

Let us again define w = (x1 , . . . , xm )0 and u = (xm+1 , . . . , xn )0 . Suppose that fw (x̃) is nonsin-
gular at some point x̃ = (w̃, ũ) in Ω which is not necessarily optimal. Then the Implicit Function
Theorem enables us to solve, in a neighborhood of x̃, the m equations f (w, u) = α. u can then vary
arbitrarily in a neighborhood of ũ. As u varies, w must change according to w = g(u) (in order to
maintain f (w, u) = α), and the objective function changes according to fˆ0 (u) = f0 (g(u), u). The
derivative of fˆ0 at ũ is

fˆ0u (ũ) = f0w gu + f0ux̃ = −λ̃0 fu (x̃) + f0u (x̃),

where
−1
λ̃0 = f0w fwx̃ , (3.27)

Therefore, the direction of steepest increase of fˆ0 at ũ is

5u fˆ0 (ũ) = −fu0 (x̃)λ̃ + fOu

0 (x̃) , (3.28)

and if ũ is optimal, 5u fˆ0 (ũ) = 0 which, together with (3.27) is equation (3.13). We shall use (3.27)
and (3.28) in the last section.
3.3. REMARKS AND EXTENSIONS 21

3.3 Remarks and Extensions

3.3.1 The condition of linear independence.
The necessary condition (3.13) need not hold if the derivatives fix (x∗ ), 1 ≤ i ≤ m, are not linearly
independent. This can be checked in the following example

Minimize
subject to sin(x21 + x22 ) (3.29)
π 2 2
2 (x1 + x2 ) = 1.

3.3.2 An alternative condition.

Keeping the notation
Pmof Theorem 3.2.1, define the Lagrangian function L : Rn+m → R by L :
(x, λ) 7→ f0 (x) − i=1 λi fi (x). The following is a reformulation of 3.12, and its proof is left as
an exercise.
Let x∗ be optimal for (3.12), and suppose that fix (x∗ ), 1 ≤ i ≤ m, are linearly independent.
Then there exists λ∗ ∈ Rm such that (x∗ , λ∗ ) is a stationary point of L, i.e., Lx (x∗ , λ∗ ) = 0 and
Lλ (x∗ , λ∗ ) = 0.

3.3.3 Second-order conditions.

Since we can convert the problem (3.12) into a problem of maximizing fˆ0 over an open set, all
the comments of Section 2.4 will apply to the function fˆ0 . However, it is useful to translate these
remarks in terms of the original function f0 and f . This is possible because the function g is
uniquely specified by (3.16) in a neighborhood of x∗ . Furthermore, if f is twice differentiable, so
is g (see Fleming [1965]). It follows that if the functions fi , 0 ≤ i ≤ m, are twice continuously
differentiable, then so is fˆ0 , and a necessary condition for x∗ to be optimal for (3.12) and (3.13) and
the condition that the (n − m) × (n − m) matrix fˆ0uu (u∗ ) is negative semi-definite. Furthermore,
if this matrix is negative definite then x∗ is a local optimum. the following exercise expresses
f fˆ0uu (u∗ ) in terms of derivatives of the functions fi .

Exercise: Show that

 
  gu 
. Lww Lwu  ... 
fˆ0uu (u∗ ) = [gu0 ..I] Luw Luu 
I  (w∗ , u∗ )

where

X
m
gu (u∗ ) = −[fw (x∗ )]−1 fu (x∗ ), L(x) = f0 (x) − λ∗i fi (x).
i=1
22 CHAPTER 3. OPTIMIZATION WITH EQUALITY CONSTRAINTS

3.3.4 A numerical procedure.

We assume that the derivatives fix (x), 1 ≤ i ≤ m, are linearly independent for all x. Then the
following algorithm is a straightforward adaptation of the procedure in Section 2.4.6.
Step 1. Find x0 arbitrary so that fi (x0 ) = αi , 1 ≤ i ≤ m. Set k = 0 and go to Step 2.
Step 2. Find a partition x = (w, u)2 of the variables such that fw (xk ) is nonsingular. Calculate λk
−1
by (λk )0 = f0w fw(xk) , and 5fˆ0k (uk ) = −fu0 (xk )λk + f0u
0 (xk ). If 5fˆk (uk ) = 0, stop. Otherwise
0
go to Step 3.
Step 3. Set ũk = uk + dk 5 fˆ0k (uk ). Find w̃k such that fi (w̃k , ũk ) = 0, 1 ≤ i ≤ m. Set
xk+1 = (w̃k , ũk ), set k = k + 1, and return to Step 2.
Remarks. As before, the step sizes dk > 0 can be selected various ways. The practical applicability
of the algorithm depends upon two crucial factors: the ease with which we can find a partition
x = (w, u) so that fw (xk ) is nonsingular, thus enabling us to calculate λk ; and the ease with which
we can find w̃k so that f (w̃k , ũk ) = α. In the next section we apply this algorithm to a practical
problem where these two steps can be carried out without too much difficulty.

3.3.5 Design of resistive networks.

Consider a network N with n + 1 nodes and b branches. We choose one of the nodes as datum
and denote by e = (e1 , . . . , en )0 the vector of node-to-datum voltages. Orient the network graph
and let v = (v1 , . . . , vb )0 and j = (j1 , . . . , jb )0 respectively, denote the vectors of branch voltages
and branch currents. Let A be the n × b reduced incidence matrix of the network graph. Then the
Kirchhoff current and voltage laws respectively yield the equations

Aj = 0 and A0 e = v (3.30)

Next we suppose that each branch k contains a (possibly nonlinear)resistive element with the form
shown in Figure 3.3, so that

jk − jsk = gk (vrk ) = gk (vk − vsk ), 1 ≤ k ≤ b, (3.31)

where vrk is the voltage across the resistor. Here jsk , vsk are the source current and voltage in the
kth branch, and gk is the characteristic of the resistor. Using the obvious vector notation js ∈ Rb ,
vs ∈ Rb for the sources, vr ∈ Rb for the resistor voltages, and g = (g1 , . . . , gb )0 , we can rewrite
(3.30) as (3.31):

j − js = g(v − vs ) = g(vr ). (3.32)

Although (3.30) implies that the current (jk −j s k) through the kth resistor depends only on the
voltage vrk = (vk −v sk ) across itself, no essential simplification is achieved. Hence, in (3.31) we
shall assume that gk is a function of vr . This allows us to include coupled resistors and voltage-
controlled current sources. Furthermore, let us suppose that there are ` design parameters p =
(p1 , . . . , p` )0 which are under our control, so that (3.31) is replaced by (3.32):

j − jx = g(vr , p) = g(v−v s , p). (3.33)

2
This is just a notational convenience. The w variable may consist of any m components of x.
3.3. REMARKS AND EXTENSIONS 23

jsk

jk − jsk
jk vrk
-
o + vsk- +
o

+ vk -

Figure 3.3: The kth branch.

If we combine (3.29) and (3.32) we obtain (3.33):

Ag(A0 e − vs , p) = is , (3.34)

where we have defined is = Ajs . The network design problem can then be stated as finding p, vs , is
so as to minimize some specified function f0 (e, p, vs , is ). Formally, we have the optimization prob-
lem (3.34):

Minimize f0 (e, p, vs , is )
(3.35)
subject to Ag(A0 e − vs , p) − is = 0.

We shall apply the algorithm 3.3.4 to this problem. To do this we make the following assumption.
Assumption: (a) f0 is differentiable. (b) g is differentiable and the n×n matrix A(∂g/∂v)(v, p)A0
is nonsingular for all v ∈ Rb , p ∈ R` . (c) The network N described by (3.33) is determinate i.e.,
for every value of (p, vs , is ) there is a unique e = E(p, vs , is ) satisfying (3.33).
In terms of the notation of 3.3.4, if we let x = (e, p, vs , is ), then assumption (b) allows us to
identify w = e, and u = (p, vs , is ). Also let f (x) = f (e, p, vs , is ) = Ag(A0 e−v s , p) − is . Now the
crucial part in the algorithm is to obtain λk at some point xk . To this end let x̃ = (ẽ, p̃, ṽs , ĩs ) be a
fixed point. Then the corresponding λ = λ̃ is given by (see (3.27))

λ̃0 = f0w (x̃)fw−1 (x̃) = f0e (x̃)fe−1 (x̃). (3.36)

From the definition of f we have

fe (x̃) = AG(ṽr , p̃)A0 ,

where ṽr = A0 ẽ − ṽs , and G(ṽr , p̃) = (∂g/∂vr )(ṽr , p̃). Therefore, λ̃ is the solution (unique by
assumption (b)) of the following linear equation:

AG0 (ṽr , p̃)A0 λ̃ = f0e

0 (x̃). (3.37)

Now (3.36) has the following extremely interesting physical interpretation. If we compare (3.33)
with (3.36) we see immediately that λ̃ is the node-to-datum response voltages of a linear network
N (ṽr , p̃) driven by the current sources f0e 0 (x̃). Furthermore, this network has the same graph as

the original network (since they have the same incidence matrix); moreover, its branch admittance
matrix, G0 (ṽr , p̃), is the transpose of the incremental branch admittance matrix (evaluated at (ṽr , p̃))
of the original network N . For this reason, N (ṽr , p̃) is called the adjoint network (of N ) at (ṽr , p̃).
24 CHAPTER 3. OPTIMIZATION WITH EQUALITY CONSTRAINTS

Once we have obtained λ̃ we can obtain 5u fˆ0 (ũ) using (3.28). Elementary calculations yield
(3.37):
   ∂g   0 
fˆ0p
0 (ũ)
[ ∂p (ṽr , p̃)]0 A0 f0p (x̃)
 0 
5u fˆ0 (ũ) =  fˆ0v s
0 (x̃) 
(ũ)  =  G0 (ṽr , p̃)A0  λ̃ +  f0v s
(3.38)
fˆ0is (ũ)
0 0 (x̃)
−I f0is

We can now state the algorithm.

Step 1. Select u0 = (p0 , vs0 , i0s ) arbitrary. Solve (3.33) to obtain e0 = E(p0 , vs0 , i0s ). Let k = 0 and
go to Step 2.
Step 2. Calculate vrk = A0 ek − vsk . calculate f0e 0 (xk ). Calculate the node-to-datum response λk of

the adjoint network N (vr , p ) driven by the current source f0e

k k 0 (xk ). Calculate 5 fˆ (uk ) from
u 0
(3.37). If this gradient is zero, stop. Otherwise go to Step 3.
Step 3. Let uk+1 = (pk+1 , vsk+1 , ik+1 s ) = uk − dk 5u fˆ0 (uk ), where dk > 0 is a predetermined
3
step size. Solve (3.33) to obtain e k+1 = (Epk+1 , vsk+1 , ik+1
s ). Set k = k + 1 and return to Step 2.
Remark 1. Each iteration from u to u k k+1 requires one linear network analysis step (the
computation of λk in Step 2), and one nonlinear network analysis step (the computation of ek+1 in
step 3). This latter step may be very complex.
Remark 2. In practice we can control only some of the components of vs and is , the rest being
fixed. The only change this requires in the algorithm is that in Step 3 we set
pk+1 = pk − dk fˆ0p0 (uk ) just as before, where as v k+1 = v k − d (∂ fˆ /∂v )(uk ) and
sj sj k 0 sj
k+1 k ˆ
ism = ism − dk (∂ f0 /∂ism )(u ) with j and m ranging only over the controllable components and
k

the rest of the components equal to their specified values.

Remark 3. The interpretation of λ as the response of the adjoint network has been exploited for
particular function f0 in a series of papers (director and Rohrer [1969a], [1969b], [1969c]). Their
derivation of the adjoint network does not appear as transparent as the one given here. Although
we have used the incidence matrix A to obtain our network equation (3.33), one can use a more
general cutset matrix. Similarly, more general representations of the resistive elements may be
employed. In every case the “adjoint” network arises from a network interpretation of (3.27),

[fw (x̃)]0 λ̃ = f0w (x̃),

with the transpose of the matrix giving rise to the adjective “adjoint.”
Exercise: [DC biasing of transistor circuits (see Dowell and Rohrer [1971]).] Let N be a transistor
circuit, and let (3.33) model the dc behavior of this circuit. Suppose that is is fixed, vsj for j ∈ J
are variable, and vsj for j ∈
/ J are fixed. For each choice of vsj , j ∈ J, we obtain the vector e and
hence the branch voltage vector v = A0 e. Some of the components vt , t ∈ T , will correspond to
bias voltages for the transistors in the network, and we wish to choose vsj , j ∈ J, so that vt is as
close as possible to a desired bias voltage vtd , t ∈ T . If we choose nonnegative numbers αt , with
relative magnitudes reflecting the importance of the different transistors then we can formulate the
criterion

Note the minus sign in the expression uk − dk 5u fˆ0 (uk ). Remember we are minimizing f0 , which is equivalent to
3

maximizing (−f0 ).
3.3. REMARKS AND EXTENSIONS 25
X
f0 (e) = αt |vt −v dt |2 .
t∈T

(i) Specialize the algorithm above for this particular case.

(ii) How do the formulas change if the network equations are written using an arbitrary cutset matrix
instead of the incidence matrix?
26 CHAPTER 3. OPTIMIZATION WITH EQUALITY CONSTRAINTS
Chapter 4

OPTIMIZATION OVER SETS

DEFINED BY INEQUALITY
CONSTRAINTS: LINEAR
PROGRAMMING

In the first section we study in detail Example 2 of Chapter I, and then we define the general linear
programming problem. In the second section we present the duality theory for linear program-
ming and use it to obtain some sensitivity results. In Section 3 we present the Simplex algorithm
which is the main procedure used to solve linear programming problems. In section 4 we apply
the results of Sections 2 and 3 to study the linear programming theory of competitive economy.
Additional miscellaneous comments are collected in the last section. For a detailed and readily ac-
cessible treatment of the material presented in this chapter see the companion volume in this Series
(Sakarovitch [1971]).

4.1 The Linear Programming Problem

4.1.1 Example.
Recall Example 2 of Chapter I. Let g and u respectively be the number of graduate and undergradu-
ate students admitted. Then the number of seminars demanded per year is 2g+u
20 , and the number of
5g+7u
lecture courses demanded per year is 40 . On the supply side of our accounting, the faculty can
offer 2(750) + 3(250) = 2250 seminars and 6(750) + 3(250) = 5250 lecture courses. Because of
his contractual agreements, the President must satisfy

2g+u
20 ≤ 2250 or 2g + u ≤ 45, 000

and

5g+7u
40 ≤ 5250 or 5g + 7u ≤ 210, 000 .

27
28 CHAPTER 4. LINEAR PROGRAMMING

Since negative g or u is meaningless, there are also the constraints g ≥ 0, u ≥ 0. Formally then the
President faces the following decision problem:

Maximize αg + βu
subject to 2g + u ≤ 45, 000
(4.1)
5g + 7u ≤ 210, 000
g ≥ 0, u ≥ 0 .

It is convenient to use a more general notation. So let x = (g, u)0 , c = (α, β)0 , b = (45000, 210000, 0, 0)0
and let A be the 4×2 matrix
 
2 1
 5 7 
A=  −1
.
0 
0 −1

Then (4.1) can be rewritten as (4.2)1

Maximize c0 x
(4.2)
subject to Ax ≤ b .

Let Ai , 1 ≤ i ≤ 4, denote the rows of A. Then the set Ω of all vectors x which satisfy the constraints
in (4.2) is given by Ω = {x|Ai x ≤ bi , 1 ≤ i ≤ 4} and is the polygon OP QR in Figure 4.1.
For each choice x, the President receives the payoff c0 x. Therefore, the surface of constant payoff
k say, is the hyperplane π(k) = {x|c0 x = k}. These hyperplanes for different values of k are
parallel to one another since they have the same normal c. Furthermore, as k increases π(k) moves
in the direction c. (Obviously we are assuming in this discussion that c 6= 0.) Evidently an optimal
decision is any point x∗ ∈ Ω which lies on a hyperplane π(k) which is farthest along the direction
c. We can rephrase this by saying that x∗ ∈ Ω is an optimal decision if and only if the plane π ∗
through x∗ does not intersect the interior of Ω, and futhermore at x∗ the direction c points away
from Ω. From this condition we can immediately draw two very important conclusions: (i) at least
one of the vertices of Ω is an optimal decision, and (ii) x∗ yields a higher payoff than all points
in the cone K ∗ consisting of all rays starting at x∗ and passing through Ω, since K ∗ lies “below”
π ∗ . The first conclusion is the foundation of the powerful Simplex algorithm which we present in
Section 3. Here we pursue consequences of the second conclusion. For the situation depicted in
Figure 4.1 we can see that x∗ = Q is an optimal decision and the cone K ∗ is shown in Figure 4.2.
Now x∗ satisfies Ax x∗ = b1 , A2 x∗ = b2 , and A3 x∗ < b3 , A4 x∗ < b4 , so that K ∗ is given by

K ∗ = {x∗ + h|A1 h ≤ 0 , A2 h ≤ 0} .

Since c0 x∗ ≥ c0 y for all y ∈ K ∗ we conclude that

c0 h ≤ 0 for all h such that A1 h ≤ 0, A2 h ≤ 0 . (4.3)

We pause to formulate the generalization of (4.3) as an exercise.

1
Recall the notation introduced in 1.1.2, so that x ≤ y means xi ≤ yi for all i.
4.1. THE LINEAR PROGRAMMING PROBLEM 29

x2

-
π(k) = {x|c0 x = k}
π∗ direction of

-
- increasing
payoff k

-
-

Q = x∗

-
-
c ⊥ π∗

A2 ⊥ P Q

-
-
{x|A2 x = b2 }
A1 ⊥ QR
- x1
A3 O R
{x|A1 x = b1 }
, A4

Figure 4.1: Ω = OP QR.

Exercise 1: Let Ai , 1 ≤ i ≤ k, be n-dimensional row vectors. Let c ∈ Rn , and let bi , 1 ≤ i ≤ k,

be real numbers. Consider the problem

Maximize c0 x
subject to Ai x ≤ bi , 1 ≤ i ≤ k .
For any x satisfying the constraints, let I(x) ⊂ {1, . . . , n} be such that Ai (x) = bi , i ∈ I(x), Ai x <
/ I(x). Suppose x∗ satisfies the constraints. Show that x∗ is optimal if an only if
bi , i ∈

c0 h ≤ 0 for all h such that Ai h ≤ 0 , i ∈ I(x∗ ).

Returning to our problem, it is clear that (4.3) is satisfied as long as c lies between A1 and A2 .
Mathematically this means that (4.3) is satisfied if and only if there exist λ∗1 ≥ 0, λ∗2 ≥ 0 such that
2

c0 = λ∗1 , A1 + λ∗2 A2 . (4.4)

As c varies, the optimal decision will change. We can see from our analysis that the situation is as
follows (see Figure 4.1):
2
Although this statement is intuitively obvious, its generalization to n dimensions is a deep theorem known as Farkas’
lemma (see Section 2).
30 CHAPTER 4. LINEAR PROGRAMMING

x∗ = Q

K∗
A2 c

A1 π∗

A3
O R

A4

Figure 4.2: K ∗ is the cone generated by Ω at x∗ .

1. x∗ = Q is optimal iff c lies between A1 and A2 iff c0 = λ∗1 A1 + λ∗2 A2 for some λ∗1 ≥ 0, λ∗2 ≥
0,
2. x∗ ∈ QP is optimal iff c lies along A2 iff c0 = λ∗2 A2 for some λ∗2 ≥ 0,
3. x∗ = P is optimal iff c lies between A3 and A2 iff c0 = λ∗2 A2 + λ∗3 A3 for some λ∗2 ≥ 0, λ∗3 ≥
0, etc.

These statements can be made in a more elegant way as follows:

x∗ ∈ Ω is optimal iff there exists λ∗i ≥ 0 , 1 ≤ i ≤ 4, such that

4
X
(a) c0 = λ∗i ai , (b) if Ai x∗ < bi then λ∗i = 0 . (4.5)
i=1

For purposes of application it is useful to separate those constraints which are of the form xi ≥ 0,
from the rest, and to reformulate (4.5) accordingly We leave this as an exercise.
Exercise 2: Show that (4.5) is equivalent to (4.6), below. (Here Ai = (ai1 , ai2 ).) x∗ ∈ Ω is optimal
iff there exist λ∗1 ≥ 0 , λ∗2 ≥ 0 such that

(a) ci ≤ λ∗1 a1i + λ∗2 a2i , i = 1, 2,

(b) if aj1 x∗1 + aj2 x∗2 < bj then x∗j = 0, j = 1, 2. (4.6)
(c) if ci < λ∗1i + λ∗2 a2i then x∗i = 0, i = 1, 2.
4.1. THE LINEAR PROGRAMMING PROBLEM 31

4.1.2 Problem formulation.

A linear programming problem (or LP in brief) is any decision problem of the form 4.7.

Maximize c1 x1 + c2 x2 + . . . + cn xn
subject to
ail x1 + ai2 x2 + . . . + ain xn ≤ bi , l ≤ i ≤ k ,
ail x1 + . . . . . . . . . + ain xn ≥ bi , k + 1 ≤ i ≤ ` ,
ail x1 + . . . . . . . . . + ain xn = bi , ` + 1 ≤ i ≤ m ,

and

xj ≥ 0 , 1≤j≤p,
xj ≥ 0 , p + 1 ≤ j ≤ q; (4.7)
xj arbitary , q + 1 ≤ j ≤ n ,

where the cj , aij , bi are fixed real numbers.

There are two important special cases:
Case I: (4.7) is of the form (4.8):

X
n
Maximize cj xj
j=1
Xn
(4.8)
subject to aij xj ≤ bi , 1≤i≤m,
j=1
xj ≥ 0 , 1≤j≤n

Case II: (4.7) is of the form (4.9):

X
n
Maximize cj xj
j=1
Xn
(4.9)
subject to aij xj = bi , 1≤i≤m,
j=1
xj ≥ 0 , 1≤j≤n.

Although (4.7) appears to be more general than (4.8) and (4.9), such is not the case.

Proposition: Every LP of the form (4.7) can be transformed into an equivalent LP of the form (4.8).
Proof.
P P
Step 1: Replace each inequality constraint aij xj ≥ bi by (−aij )xj ≤ (−bi ).
P
Step 2: ReplaceP
P each equality constraint aij xj = bi by two inequality constraints:
aij xj ≤ bi , (−aij )xj ≤ (−bi ).
Step 3: Replace each variable xj which is constrained xj ≤ 0 by a variable yj = −xj constrained
yj ≥ 0 and then replace aij xj by (−aij )yj for every i and cj xj by (−cj )yj .
32 CHAPTER 4. LINEAR PROGRAMMING

Step 4: Replace each variable xj which is not constrained in sign by a pair of variables
yj −z j = xj constrained yj ≥ 0, zj ≥ 0 and then replace aij xj by aij yj + (−aij )zj for every i and
cj xj by cj yj + (−cj )zj . Evidently the resulting LP has the form (4.8) and is equivalent to the
original one. ♦
Proposition: Every LP of the form (4.7) can be transformed into an equivalent LP of the from (4.9)
Proof. P
Step
P 1: Replace each inequality constraint aij xj ≤ bi by the equality constraint
aij xj + yi = bi where yi is an additionalPvariable constrained yi ≥ 0.
Step 2: Replace each inequality constraint
P aij xj ≥ bi by the equality constraint
aij xj − yi = bi where yi is an additional variable constrained by yi ≥ 0. (The new variables
added in these steps are called slack variables.)
Step 3, Step 4: Repeat these steps from the previous proposition. Evidently the new LP has the
form (4.9) and is equivalent to the original one. ♦

4.2 Qualitative Theory of Linear Programming

4.2.1 Main results.
We begin by quoting a fundamental result. For a proof the reader is referred to (Mangasarian
[1969]).
Farkas’ Lemma. Let Ai , 1 ≤ i ≤ k, be n-dimensional row vectors. Let c ∈ Rn be a column vector.
The following statements are equivalent:
(i) for all x ∈ Rn , Ai x ≤ 0 for 1 ≤ i ≤ k implies c0 x ≤ 0,
X
k
(ii) there exists λ1 ≥ 0, . . . , λk ≥ 0 such that c0 = λi Ai .
i=1
An algebraic version of this result is sometimes more convenient.
Farkas’ Lemma (algebraic version). Let A be a k × n matrix. Let c ∈ Rn . The following statements
are equivalent.
(i) for all x ∈ Rn , Ax ≤ 0 implies c0 x ≤ 0,
(ii) there exists λ ≥ 0, λ ∈ Rk , such that A0 λ = c.
Using this result it is possible to derive the main results following the intuitive reasoning of (4.1).
We leave this development as two exercises and follow a more elegant but less intuitive approach.
Exercise 1: With the same hypothesis and notation of Exercise 1 in 4.1,X
use the first version of
0 ∗ ∗
Farkas lemma to show that there exist λi ≥ 0 for i ∈ I(x ) such that λ∗i Ai = c0 .
i∈I(x∗ )
Exercise 2: Let x∗ satisfy the constraints for problem (4.17). Use the previous exercise to show
that x∗ is optimal iff there exist λ∗1 ≥ 0, . . . , λ∗m ≥ 0 such that
Xm
(a) cj ≤ λ∗i aij , 1 ≤ j ≤ n
i=1
X
n X
m
(b) if aij x∗j < bi then λ∗i = 0 , 1 ≤ i ≤ m (c) if λ∗i aij > cj then x∗j = 0 , 1 ≤ j ≤ m.
j=1 i=1

In the remaining discussion, c ∈ Rn , b ∈n are fixed vectors, and A = {aij } is a fixed m × n

matrix, whereas x ∈ Rn and λ ∈ Rm will be variable. Consider the pair of LPs (4.10) and (4.11)
4.2. QUALITATIVE THEORY OF LINEAR PROGRAMMING 33

below. (4.10) is called the primal problem and (4.11) is called the dual problem.

Maximize c1 x1 + . . . + cn xn
(4.10)
subject to ai1 x1 + . . . + ain xn ≤ bi , 1 ≤ i ≤ m
xj ≥ 0 , 1 ≤ j ≤ n .

Maximize λ1 b1 + . . . + λm bm
(4.11)
subject to λ1 a1j + . . . + λm amj ≥ cj , 1 ≤ j ≤ n
λi ≥ 0 , 1 ≤ i ≤ m .

Definition: Let Ωp = {x ∈ Rn |Ax ≤ b, x ≥ 0} be the set of all points satisfying the constraints
of the primal problem. Similarly let Ωd = {λ ∈ Rm |λ0 A ≥ c0 , λ ≥ 0}. A point x ∈ Ωp (λ ∈ Ωd ) is
said to be a feasible solution or feasible decision for the primal (dual).
The next result is trivial.
Lemma 1: (Weak duality) Let x ∈ Ωp , λ ∈ Ωd . Then

c0 x ≤ λ0 Ax ≤ λ0 b. (4.12)

Proof: x ≥ 0 and λ0 A − c0 ≥ 0 implies (λ0 A−c0 )x ≥ 0 giving the first inequality. b−Ax ≥ 0 and
λ0 ≥ 0 implies λ0 (b−Ax) ≥ 0 giving the second inequality. ♦
Corollary 1: If x∗ ∈ Ω and λ∗ ∈ Ωd such that c0 x∗ = (λ∗ )0 b, then x∗ is optimal for (4.10) and λ∗ is
optimal for (4.11).
Theorem 1: (Strong duality) Suppose Ωp 6= φ and Ωd 6= φ. Then there exists x∗ which is optimum
for (4.10) and λ∗ which is optimum for (4.11). Furthermore, c0 x∗ = (λ∗ )0 b.
Proof: Because of the Corollary 1 it is enough to prove the last statement, i.e., we must show that
there exist x ≥ 0, λ ≥ 0, such that Ax ≤ b, A0 λ ≥ c and b0 λ−c0 x ≤ 0. By introducing slack
variables y ∈ Rm , µ ∈ Rm , r ∈ R, this is equivalent to the existence of x ≥ 0, y ≥ 0, λ ≥ 0, µ ≤
0, r ≤ 0 such that
 
x
   
A Im  y  b
 
 A0 −I n  λ = c 
 
−c0 b0 1  µ  0
r

By the algebraic version of Farkas’ Lemma, this is possible only if

A0 ξ − cθ ≤ 0 , ξ ≤ 0 ,
Aw = bθ ≤ 0 , −w ≤ 0 , (4.13)
θ≤0

implies

b0 ξ + c0 w ≤ 0. (4.14)
34 CHAPTER 4. LINEAR PROGRAMMING

Case (i): Suppose (w, ξ, θ) satisfies (4.13) and θ < 0. Then (ξ/θ) ∈ Ωd , (w/−θ) ∈ Ωp , so that by
Lemma 1 c0 w/(−θ) ≤ b0 ξ/θ, which is equivalent to (4.14) since θ < 0.
Case (ii): Suppose (w, ξ, θ) satisfies (4.13) and θ = 0, so that −A0 ξ ≥ 0, −ξ ≥ 0, Aw ≤ 0, w ≥ 0.
By hypothesis, there exist x ∈ Ωp , λ ∈ Ωd . Hence, −b0 ξ = b0 (−ξ) ≥ (Ax)0 (−ξ) = x0 (−A0 ξ) ≥ 0,
and c0 w ≤ (A0 λ)0 w = λ0 (Aw) ≤ 0. So that b0 ξ + c0 w ≤ 0. ♦
The existence part of the above result can be strengthened.
Theorem 2: (i) Suppose Ωp 6= φ. Then there exists an optimum decision for the primal LP iff
Ωd 6= φ.
(ii) Suppose Ωd 6= φ. Then there exists an optimum decision for the dual LP iff Ωp 6= φ.
Proof Because of the symmetry of the primal and dual it is enough to prove only (i). The
sufficiency part of (i) follows from Theorem 1, so that only the necessity remains. Suppose, in
contradiction, that Ωd = φ. We will show that sup {c0 x|x ∈ Ωp } = +∞. Now, Ωd = φ means
there does not exist λ ≥ 0 such that A0 λ ≥ c. Equivalently, there does not exist λ ≥ 0, µ ≤ 0 such
that
 
  λ
|  
A0 −In  − − −  = c
|
µ
By Farkas’ Lemma there exists w ∈ Rn such that Aw ≤ 0, −w ≤ 0, and c0 w > 0. By hypothesis,
Ωp 6= φ, so there exists x ≥ 0 such that Ax ≤ b. but then for any θ > 0, A(x + θw) ≤ b,
(x + θw) ≥ 0, so that (x + θw) ∈ Ωp . Also, c0 (x + θw) = c0 x + θc0 w. Evidently then, sup
{c0 x|x ∈ Ωp } = +∞ so that there is no optimal decision for the primal. ♦
Remark: In Theorem 2(i), the hypothesis that Ωp 6= φ is essential. Consider the following exercise.
Exercise 3: Exhibit a pair of primal and dual problems such that neither has a feasible solution.
Theorem 3: (Optimality condition) x∗ ∈ Ωp is optimal if and only if there exists λ∗ ∈ Ωd such that

X
m
aij x∗j < bi implies λ∗i = 0 ,
j=1
and (4.15)
Xm
λ∗i aij < cj implies x∗j = 0 .
i=1

((4.15) is known as the condition of complementary slackness.)

Proof: First of all we note that for x∗ ∈ Ωp , λ∗ ∈ Ωd , (4.15) is equivalent to (4.16):
(λ∗ )0 (Ax∗ − b) = 0, and (A0 λ∗ − c)0 x∗ = 0 . (4.16)
Necessity. Suppose x∗ ∈ Ωp is optimal. Then from Theorem 2, Ωd 6= φ, so that by Theorem 1
there exists λ∗ ∈ Ωd such that c0 x∗ = (λ∗ )0 b. By Lemma 1 we always have
c0 x∗ ≤ (λ∗ )0 Ax∗ ≤ (λ∗ )0 b so that we must have c0 x∗ = (λ∗ )0 Ax∗ = (λ∗ )0 b. But (4.16) is just an
equivalent rearrangement of these two equalities.
Sufficiency. Suppose (4.16) holds for some x∗ ∈ Ωp , λ∗ ∈ Ωd . The first equality in (4.16) yields
(λ∗ )0 b = (λ∗ )0 Ax∗ = (A0 λ∗ )0 x∗ , while the second yields (A0 λ∗ )0 x∗ = c0 x∗ , so that c0 x∗ = (λ∗ )0 b.
By Corollary 1, x∗ is optimal. ♦
4.2. QUALITATIVE THEORY OF LINEAR PROGRAMMING 35

The conditions x∗ ∈ Ωp , x∗ ∈ Ωd in Theorem 3 can be replaced by the weaker x∗ ≥ 0, λ∗ ≥ 0

provided we strengthen (4.15) as in the following result, whose proof is left as an exercise.

Theorem 4: (Saddle point) x∗ ≥ 0 is optimal for the primal if and only if there exists λ∗ ≥ 0 such
that

L(x, λ∗ ) ≤ L(x∗ , λ∗ ) ≤ L(x∗ , λ) for all x ≥ 0, and allλ ≥ 0, (4.17)

where L: Rn xRm → R is defined by

L(x, λ) = c0 x − λ0 (Ax − b) (4.18)

Exercise 4: Prove Theorem 4.

Remark. The function L is called the Lagrangian. A pair (x∗ , λ∗ ) satisfying (4.17) is said to form
a saddle-point of L over the set {x|x ∈ Rn , x ≥ 0} × {λ|λ ∈ Rm , λ ≥ 0}.

4.2.2 Results for problem (4.9).

It is possible to derive analogous results for LPs of the form (4.9). We state these results as exercises,
indicating how to use the results already obtained. We begin with a pair of LPs:

Maximize c1 x1 + . . . + cn xn
subject to ail x1 + . . . + ain xn = bi , 1 ≤ i ≤ m , (4.19)
xj ≥ 0 , 1 ≤ j ≤ n .

Minimize λ1 b1 + . . . + λm bm
(4.20)
subject to λ1 a1j + . . . + λm amj ≥ cj , 1≤j≤n .

Note that in (4.20) the λi are unrestricted in sign. Again (4.19) is called the primal and (4.20) the
dual. We let Ωp , Ωd denote the set of all x, λ satisfying the constraints of (4.19), (4.20) respectively.

Exercise 5: Prove Theorems 1 and 2 with Ωp and Ωd interpreted as above. (Hint. Replace (4.19)
by the equivalent LP: maximize c0 x, subject to Ax ≤ b, (−A)x ≤ (−b), x ≥ 0. This is now of the
form (4.10). Apply Theorems 1 and 2.)
Exercise 6: Show that x∗ ∈ Ωp is optimal iff there exists λ∗ ∈ Ωd such that

X
m
x∗j > 0 implies λ∗i aij = cj .
i=1

Exercise 7: x∗ ≥ 0 is optimal iff there exists λ∗ ∈ Rm such that

L(x, λ∗ ) ≤ L(x∗ , λ∗ ) ≤ L(x∗ , λ) for all x ≥ 0, λ ∈ Rm .

where L is defined in (4.18). (Note that, unlike (4.17), λ is not restricted in sign.)
Exercise 8: Formulate a dual for (4.7), and obtain the result analogous to Exercise 5.
36 CHAPTER 4. LINEAR PROGRAMMING

4.2.3 Sensitivity analysis.

We investigate how the maximum value of (4.10) or (4.19) changes as the vectors b and c change.
The matrix A will remain fixed. Let Ωp and Ωd be the sets of feasible solutions for the pair (4.10) and
(4.11) or for the pair (4.19) and (4.20). We write Ωp (b) and Ωd (c) to denote the explicit dependence
on b and c respectively. Let B = {b ∈ Rm |Ωp (b) 6= φ} and C = {c ∈ Rn |Ωd (c) 6= φ}, and for
(b, c) ∈ B × C define

M (b, c) = max {c0 x|x ∈ Ωp (b)} = min {λ0 b|λ ∈ Ωd (c)} . (4.21)

For 1 ≤ i ≤ m, ε ∈ R, b ∈ Rm denote

b(i, ε) = (b1 , b2 , . . . , bi−1 , bi + ε, bi+1 , . . . , bm )0 ,

and for 1 ≤ j ≤ n, ε ∈ R, c ∈ Rn denote

c(j, ε) = (c1 , c2 , . . . , cj−1 , cj + ε, cj+1 , . . . , cn )0 .

We define in the usual way the right and left hand partial derivatives of M at a point (b̂, ĉ) ∈ B × C
as follows:

∂M + 1
∂bi (b̂, ĉ) = lim ε {M (b̂(i, ε), ĉ) − M (b̂, ĉ)} ,
ε→0
ε>0

∂M − 1
∂bi (b̂, ĉ) = lim ε {M (b̂, ĉ) − M (b̂(i, −ε), ĉ)} ,
ε→0
ε>0

∂M + 1
∂cj (b̂, ĉ) = lim ε {M (b̂, ĉ(j, ε)) − M (b̂, ĉ} ,
ε→0
ε>0

∂M − 1
∂cj (b̂, ĉ) = lim ε {M (b̂, ĉ − M (b̂, ĉ(j, −ε))} ,
ε→0
ε>0
◦ ◦
Let B , C denote the interiors of B, C respectively.
◦ ◦
Theorem 5: At each (b̂, ĉ) ∈B × C , the partial derivatives given above exist. Furthermore, if
x̂ ∈ Ωp (b̂), λ̂ ∈ Ωd (ĉ) are optimal, then
∂M + ∂M −
∂bi (b̂, ĉ) ≤ λ̂i ≤ ∂bi (b̂, ĉ) , 1≤i≤m, (4.22)
4.3. THE SIMPLEX ALGORITHM 37

∂M + ∂M −
∂cj (b̂, ĉ) ≥ x̂j ≥ ∂cj (b̂, ĉ) , 1≤j≤n, (4.23)
Proof: We first show (4.22), (4.23) assuming that the partial derivatives exist. By strong duality
M (b̂, ĉ) = λ̂0 b̂, and by weak duality M (b̂(i, ε), ĉ) ≤ λ̂0 b̂(i, ε), so that

1 1 0
ε {M (b̂(i, ε), ĉ) − M (b̂, ĉ)} ≤ ε λ̂ {b̂(i, ε) − b̂}λ̂i , for ε > 0,
1 1 0
ε {M (b̂, ĉ) − M (b̂(i, −ε), ĉ)} ≥ ε λ̂ {b̂ − b̂(i, −ε)} = λ̂i , for ε > 0.
Taking limits as ε → 0, ε > 0, gives (4.22).
On the other hand, M (b̂, ĉ) = ĉ0 x̂, and M (b̂, ĉ(j, ε)) ≥ (ĉ(j, ε))0 x̂, so that
1
− M (b̂, ĉ)} ≥ 1ε {ĉ(j, ε)0 − ĉ}0 x̂ = x̂j , for ε > 0,
ε {M (b̂, ĉ(j, ε))
1 1 0
ε {M (b̂, ĉ) − M (b̂, ĉ(j, −ε))} ≤ ε {ĉ − ĉ(j, −ε)} x̂ = x̂j , for ε > 0,
which give (4.23) as ε → 0, ε > 0.
Finally, the existence of the right and left partial derivatives follows from Exercises 8, 9 below. ♦
We recall some fundamental definitions from convex analysis.
Definition: X ⊂ Rn is said to be convex if x, y ∈ X and 0 ≤ θ ≤ 1 implies (θx + (1 − θ)y) ∈ X.
Definition: Let X ⊂ Rn and f : X → R. (i) f is said to be convex if X is convex, and x, y ∈ X,
0 ≤ θ ≤ 1 implies f (θx + (1 − θ)y) ≤ θf (x) + (1 − θ)f (y). (ii) f is said to be concave if −f is
convex, i.e., x, y ∈ X, 0 ≤ θ ≤ 1 implies f (θx + (1 − θ)y) ≥ θf (x) + (1 − θ)f (y).
Exercise 8: (a) Show that Ωp , Ωd , and the sets B ⊂ Rm , C ⊂ Rn defined above are convex sets.
(b) Show that for fixed c ∈ C, M (·, c) : B → R is concave and for fixed b ∈ B, M (b, ·) : C → R
is convex.
Exercise 9: Let X ⊂ Rn , and f : X → R be convex. Show that at each point x̂ in the interior of
X, the left and right hand partial derivatives of f exist. (Hint: First show that for
ε2 > ε1 > 0 > δ1 > δ2 ,(1/ε2 ){f (x̂(i, ε2 )) − f (x̂)} ≥ (1/ε1 ){f (x̂(i, ε1 )) − f (x̂))} ≥
(1/δ1 ){f (x̂(i, δ1 )) − f (x̂))} ≥ (1/δ2 ){f (x̂(i, δ2 )) − f (x̂)}. Then the result follows immediately.)
Remark 1: Clearly if (∂M/∂bi )(b̂) exists, then we have equality in (4.22), and then this result
compares with 3.14).
Remark 2: We can also show without difficulty that M (·, c) and M (b, ·) are piecewise linear (more
accurately, linear plus constant) functions on B and C respectively. This is useful in some
computational problems.
Remark 3: The variables of the dual problem are called Lagrange variables or dual variables or
shadow-prices. The reason behind the last name will be clear in Section 4.

4.3 The Simplex Algorithm

4.3.1 Preliminaries
We now present the celebrated Simplex algorithm for finding an optimum solution to any LP of the
form (4.24):
Maximize c1 x1 + . . . + cn xn
subject to ail x1 + . . . + ain xn = bi , 1 ≤ i ≤ m (4.24)
xj ≥ 0 , 1 ≤ j ≤ n .
38 CHAPTER 4. LINEAR PROGRAMMING

As mentioned in 4.1 the algorithm rests upon the observations that if an optimal exists, then at least
one vertex of the feasible set Ωp is an optimal solution. Since Ωp has only finitely many vertices (see
Corollary 1 below), we only have to investigate a finite set. The practicability of this investigation
depends on the ease with which we can characterize the vertices of Ωp . This is done in Lemma 1.
In the following we let Aj denote the jth column of A, i.e., Aj = (a1j , . . . , amj )0 . We begin with
a precise definition of a vertex.

Definition: x ∈ Ωp is said to be a vertex of Ωp if x = λy + (1 − λ)z, with y, z in Ωp and

0 < λ < 1, implies x = y = z.
Definition: For x ∈ Ωp , let I(x) = {j|xj > 0}.
Lemma 1: Let x ∈ Ωp . Then x is a vertex of Ωp iff {Aj |j ∈ I(x)} is a linearly independent set.
Exercise 1: Prove Lemma 1.
Xm
n!
Corollary 1: Ωp has at most vertices.
(n − j)!
j=1
Lemma 2: Let x∗ be an optimal decision of (4.24). Then there is a vertex z ∗ of Ωp which is optimal.
Proof: If {Aj |j ∈ I(x∗ )} is linearly independent, let z ∗ = x∗ and we are done. Hence suppose
{Aj |j ∈ I(x∗ )} is linearly dependent so that there exist γj , not all zero, such that
X
γj Aj = 0 .
j∈I(x∗ )

For θ ∈ R define z(θ) ∈ Rn by


x∗j = θγj , j ∈ I(x∗ )
zj (θ) =
x∗j = 0 , j 6∈ I(x∗ ) .

X X X
Az(θ) = zj (θ)Aj = x∗j Aj + θ γj Aj
j∈I(x∗ ) j∈I(x∗ ) j∈I(x∗ )

=b+θ·0=b.
Since x∗j > 0 for j ∈ I(x∗ ), it follows that z(θ) ≥ 0 when
n ∗  o
xj  ∗)
|θ| ≤ min |γ |
j ∈ I(x = θ ∗ say .
j

Hence z(θ) ∈ Ωp whenever |θ| ≤ θ ∗ . Since x∗ is optimal we must have

X
c0 x∗ ≥ c0 z(θ) = c0 x∗ + θ cj yj for −∗ θ ≤ θ ≤ θ ∗ .
j∈I(x∗ )
X
Since θ can take on positive and negative values, the inequality above can hold on if cj γj =
J∈I(x∗ )
0, and then c0 x∗ = c0 z(θ), so that z(θ) is also an optimal solution for |θ| ≤ θ ∗ . But from the
definition of z(θ) it is easy to see that we can pick θ0 with |θ0 | = θ ∗ such that zj (θ0 ) = x∗j +θ0 γj = 0
for at least one j = j0 in I(x∗ ). Then,

I(z(θ0 )) ⊂ I(x∗ ) − {j0 } .

4.3. THE SIMPLEX ALGORITHM 39

Again, if {Aj |j ∈ I(z(θ0 ))} is linearly independent, then we let z ∗ = z(θ0 ) and we are done.
Otherwise we repeat the procedure above with z(θ0 ). Clearly, in a finite number of steps we will
find an optimal decision z ∗ which is also vertex. ♦
At this point we abandon the geometric term “vertex” and how to established LP terminology.
Definition: (i) z is said to be a basic feasible solution if z ∈ Ωp , and {Aj |j ∈ I(z)} is linearly
independent. The set I(z) is then called the basis at z, and xj , j ∈ I(z), are called the basic
variables at z. xj , j 6∈ I(z) are called the non-basic variables at z.
Definition: A basic feasible solution z is said to be non-degenerate if I(z) has m elements.
Notation: Let z be a non-degenerate basic feasible solution, and let j1 < j2 < . . . < jm
. . .
constitute I(z). Let D(z) denote the m × m non-singular matrix D(z) = [Aj1 ..Aj2 .. . . . ..Ajm ], let
c(z) denote the m-dimensional column vector c(z) = (cj1 , . . . , cjm )0 and define λ(z) by λ0 (z) =
c0 (z)[D(z)]−1 . We call λ(z) the shadow-price vector at z.
Lemma 3: Let z be a non-degenerate basic feasible solution. Then z is optimal if and only if

λ0 (z)A ≥ cj , for all , j 6∈ I(z) . (4.25)

Proof: By Exercise 6 of Section 2.2, z is optimal iff there exists λ such that

λ0 Aj = cj , for , j ∈ I(z) , (4.26)

λ0 Aj ≥ cj , for , j 6∈ I(z) , (4.27)

But since z is non-degenerate, (4.26) holds iff λ = λ(z) and then (4.27) is the same as (4.25). ♦

4.3.2 The Simplex Algorithm.

The algorithm is divided into two parts: In Phase I we determine if Ωp is empty or not, and if not,
we obtain a basic feasible solution. Phase II starts with a basic feasible solution and determines if
it is optimal or not, and if not obtains another basic feasible solution with a higher value. Iterating
on this procedure, in a finite number of steps, either we obtain an optimum solution or we discover
that no optimum exists, i.e., sup {c0 x|x ∈ Ωp } = +∞. We shall discuss Phase II first.
We make the following simplifying assumption. We will comment on it later.

Assumption of non-degeneracy. Every basic feasible solution is non-degenerate.

Phase II:
Step 1. Let z 0 be a basic feasible solution obtained from Phase I or by any other means. Set k = 0
and go to Step 2.
Step 2. Calculate [D(z k )]−1 ,c(z k ), and the shadow-price vector λ0 (z k ) = c0 (z k )[D(z k )]−1 . For
each j 6∈ I(z k ) calculate cj − λ0 (z k )Aj . If all these numbers are ≤ 0, stop, because z k is optimal
by Lemma 3. Otherwise pick any ĵ 6∈ I(z k ) such that cĵ − λ0 (z k )Aĵ > 0 and go to Step 3.
Step 3. Let I(z k ) consist of j1 < j2 < . . . < jm . Compute the vector
γ k = (γjk1 , . . . γjkm )0 = [D(z k )]−1 Aĵ . If γ k ≤ 0, stop, because by Lemma 4 below, there is no
finite optimum. Otherwise go to Step 4.
Step 4. Compute θ = min {(zjk γjk )|j ∈ i(z), γjk > 0}. Evidently 0 < θ < ∞. Define z k+1 by
40 CHAPTER 4. LINEAR PROGRAMMING
 k
 zj − θγj , j ∈ I(z)
k

zjk+1 = θ , j = ĵ (4.28)
 k
zj = 0 , j=6 ĵ and j 6∈ I(z) .

By Lemma 5 below, z k+1 is a basic feasible solution with c0 z k+1 > c0 z k . Set k = k + 1 and return
to Step 2.
Lemma 4: If γ k ≤ 0, sup {c0 x|x ∈ Ωp } = ∞.
Proof: Define z(θ) by


 zj − θγjk , j ∈ I(z)
zj (θ) = θ , j = ĵ (4.29)

zj = 0 , j∈6 I(z) and j 6= ĵ .
X
First of all, since γ k ≤ 0 it follows that z(θ) ≥ 0 for θ ≥ 0. Next, Az(θ) = Az − θ γjk Aj +
j∈I(z)

θA = Az by definition of
ĵ
γk. Hence, z(θ) ∈ Ωp for θ ≥ 0. Finally,
0 0 k k
c0 z(θ) = c z − θc (z )γ + θcĵ
= c0 z + θ{cĵ − c0 (z k )[D(z k )]−1 Aĵ } (4.30)
= c0 z + θ{cĵ − λ0 (z k )Aĵ }i .

But from step 2 {cĵ − λ0 (z k )Aĵ } > 0, so that c0 z(θ) → ∞ as θ → ∞. ♦

Lemma 5: z k+1 is a basic feasible solution and c0 z k+1 > c0 z k .

Proof: Let j̃ ∈ I(z k ) be such that γj̃k > 0 and zj̃k = θγj̃k . Then from (4.28) we see that zj̃k+1 = 0,
hence

S
I(z k+1 ) ⊂ (I(z) − {j̃}) {ĵ} , (4.31)

so that it is enough to prove that Aj̃ is independent of {Aj |j ∈ I(z), j 6= j̃}. But if this is not the
case, we must have γj̃k = 0, giving a contradiction. Finally if we compare (4.28) and (4.29), we see
from (4.30) that

c0 zk+1 − c0 zk = θ{cĵ − γ 0 (z k )Aĵ } ,

which is positive from Step 2. ♦

Corollary 2: In a finite number of steps Phase II will obtain an optimal solution or will determine
that sup{c0 x|x ∈ Ωp } = ∞.
Corollary 3: Suppose Phase II terminates at an optimal basic feasible solution z ∗ . Then γ(z ∗ ) is an
optimal solution of the dual of (4.24).
Exercise 2: Prove Corollaries 2 and 3.
Remark 1: By the non-degeneracy assumption, I(z k+1 ) has m elements, so that in (4.31) we must
have equality. We see then that D(z k+1 ) is obtained from D(z k ) by replacing the column Aj by
4.3. THE SIMPLEX ALGORITHM 41

. . . . . .
the column Aĵ . More precisely if D(z k ) = [Aj1 .. . . . ..Aji−1 ..Aj̃ ..Aji+1 .. . . . ..Ajm ] and if
. . . . . . . . .
jk < ĵ < jk+1 then D(z k+1 ) = [Aj1 .. . . . ..Aji−1 ..Aji+1 .. . . . ..Ajk ..Aĵ ..Ajk+1 .. . . . ..Ajm ]. Let E be the
. . . . . .
matrix E = [Aj1 .. . . . ..Aji−1 ..Aĵ ..Aji+1 .. . . . ..Ajm ]. Then [D(z k+1 )]−1 = P E −1 where the matrix P
X m
permutes the columns of D(z k+1 ) such that E = D(z k+1 )P . Next, if A =ĵ γj` Aj` , it is easy
`=1
to check that E −1 = M [D(z k )]−1 where
 −γ j1 
 1 1 .
γj̃

 .. 
 
 1 
M =
 1 

 γj̃ 
 1 . 
 . . 1 
−γ jm
γj̃

↑
ith column
Then [D(z k+1 )]−1 = P M [D(z k )]−1 , so that these inverses can be easily computed.
Remark 2: The similarity between Step 2 of Phase II and Step 2 of the algorithm in 3.3.4 is
striking. The basic variables at z k correspond to the variables wk and non-basic variables
correspond to uk . For each j 6∈ I(z k ) we can interpret the number cj − λ0 (z k )Aj to be the net
increase in the objective value per unit increase in the jth component of z k . This net increase is due
to the direct increase cj minus the indirect decrease λ0 (z k )Aj due to the compensating changes in
the basic variables necessary to maintain feasibility. The analogous quantity in 3.3.4 is
(∂f0 /∂uj )(xk ) − (λk )0 (∂f /∂uj )(xk ).
Remark 3: By eliminating any dependent equations in (4.24) we can guarantee that the matrix A
has rank n. Hence at any degenerate basic feasible solution z k we can always find I(z ¯ k ) ⊃ I(z k )
¯ ¯
such that I(z ) has m elements and {Aj |j ∈ I(z )} is a linearly independent set. We can apply
k k
¯ k ) instead of I(z k ). But then in Step 4 it may turn out that θ = 0 so that
Phase II using I(z
¯ k ) is not unique, so that we have to try various
z k+1 = z k . The reason for this is that I(z
¯
alternatives for I(z ) until we find one for which θ > 0. In this way the non-degeneracy
k

assumption can be eliminated. For details see (Canon, et al., [1970]).

We now describe how to obtain an initial basic feasible solution.
Phase I:
Step I. by multiplying some of the equality constraints in (4.24) by −1 if necessary, we can assume
that b ≥ 0. Replace the LP (4.24) by the LP (4.32) involving the variables x and y:

X
m
Maximize − yi
(4.32)
i=1
subject to ail x1 + . . . + ain xn + yi = bi , 1 ≤ i ≤ m ,
xj ≥ 0 , y i ≥ 0 , 1 ≤ j ≤ n , 1 ≤ i ≤ m .
42 CHAPTER 4. LINEAR PROGRAMMING

Go to step 2.

Step 2. Note that (x0 , y 0 ) = (0, b) is a basic feasible solution of (4.32). Apply phase II to (4.32)
starting with this solution. Phase II must terminate in an optimum based feasible solution (x∗ , y ∗ )
Xm
since the value of the objective function in (4.32) lies between − bi and 0. Go to Step 3.
i=1
y∗
Step 3. If = 0, x∗ y∗
is a basic feasible solution for (4.24). If 6= 0, by Exercise 3 below, (4.24)
has no feasible solution.
Exercise 3: Show that (4.24) has a feasible solution iff y ∗ = 0.

4.4 LP Theory of a Firm in a Competitive Economy

4.4.1 Activity analysis of the firm.
We think of a firm as a system which transforms input into outputs. There are m kinds of inputs
and k kinds of outputs. Inputs are usually classified into raw materials such as iron ore, crude oil,
or raw cotton; intermediate products such as steel, chemicals, or textiles; capital goods 3 such as
machines of various kinds, or factory buildings, office equipment, or computers; finally various
kinds of labor services. The firm’s outputs themselves may be raw materials (if it is a mining
company) or intermediate products (if it is a steel mill) or capital goods (if it manufactures lathes)
or finished goods (if it makes shirts or bakes cookies) which go directly to the consumer. Labor is
not usually considered an output since slavery is not practiced; however, it may be considered an
output in a “closed,” dynamic Malthusian framework where the increase in labor is a function of the
output. (See the von Neumann model in (Nikaido [1968]), p. 141.)
Within the firm, this transformation can be conducted in different ways, i.e., different combina-
tions of inputs can be used to produce the same combination of outputs, since human labor can
do the same job as some machines and machines can replace other kinds of machines, etc. This
substitutability among inputs is a fundamental concept in economics. We formalize it by specifying
which transformation possibilities are available to the firm.
By an input vector we mean any m-dimensional vector r = (r1 , . . . , rm )0 with r ≥ 0, and by an
output vector we mean any k-dimensional vector y = (y1 , . . . , yk )0 with y ≥ 0. We now make three
basic assumptions about the firm.
(i) The transformation of inputs into outputs is organized into a finite number, say n, of processes
or activities.
(ii) Each activity combines the k inputs in fixed proportions into the m outputs in fixed propor-
tions. Furthermore, each activity can be conducted at any non-negative intensity or level. Pre-
cisely, the jth activity is characterized completely by two vectors Aj = (a1j , a2j , . . . , amj )0 and
B j = (bij , . . . , bkj )0 so that if it is conducted at a level xj ≥ 0, then it combines (transforms) the
input vector (a1j xj , . . . , amj xj )0 = xj Aj into the output vector (b1j xj , . . . , bkj xj )0 = xj B j . Let
. . . .
A be the m × n matrix [A1 .. . . . ..An ] and B be the k × n matrix B = [B 1 .. . . . ..B n ].
3
It is more accurate to think of the services of capital goods rather than these goods themselves as inputs. It is these
services which are consumed in the transformation into outputs.
4.4. LP THEORY OF A FIRM IN A COMPETITIVE ECONOMY 43

(iii) If the firm conducts all the activities simultaneously with the jth activity at level xj ≥ 0, 1 ≤ j ≤
n, then it transforms the input vector x1 A1 + . . . + xn An into the output vector x1 B 1 + . . . + xn B n .
With these assumptions we know all the transformations technically possible as soon as we spec-
ify the matrices A and B. Which of these possible transformations will actually take place depends
upon their relative profitability and availability of inputs. We study this next.

4.4.2 Short-term behavior.

In the short-term, the firm cannot change the amount available to it of some of the inputs such as
capital equipment, certain kinds of labor, and perhaps some raw materials. Let us suppose that these
inputs are 1, 2, . . . , ` and they are available in the amounts r1∗ , . . . , r`∗ , whereas the supply of the
remaining inputs can be varied. We assume that the firm is operating in a competitive economy
which means that the unit prices p = (p1 , . . . , pk )0 of the outputs, and q = (q1 , . . . , qm )0 of the
inputs is fixed. Then the manager of the firm, if he is maximizing the firm’s profits, faces the
following decision problem:
X
m
Maximize p0 y − q j rj
j=`+1
subject to y = Bx, (4.33)
ai1 x1 + . . . + ain xn ≤ ri∗ , 1 ≤ i ≤ ` ,
ai1 x1 + . . . + ain xn ≤ ri , ` + 1 ≤ i ≤ m ,
xj ≥ 0, 1 ≤ j ≤ n; ri ≥ 0 , ` + 1 ≤ i ≤ m .
The decision variables are the activity levels x1 , . . . , xn , and the short-term input supplies r`+1 , . . . , rm .
The coefficients of B and A are the fixed technical coefficients of the firm, the ri∗ are the fixed short-
term supplies, whereas the pi , qj are prices determined by the whole economy, which the firm ac-
cepts as given. Under realistic conditions (4.33) has an optimal solution, say, x∗1 , . . . , x∗n , r`+1
∗ , . . . , r∗ .
m

4.4.3 Long-term equilibrium behavior.

In the long run the supplies of the first ` inputs are also variable and the firm can change these
supplies from r1∗ , . . . , r`∗ by buying or selling these inputs at the market price q1 , . . . , q` . Whether
the firm will actually change these inputs will depend upon whether it is profitable to do so, and in
turn this depends upon the prices p, q. We say that the prices (p∗ , q ∗ ) and a set of input supplies
r ∗ = (r1∗ , . . . , rm
∗ ) are in (long-term) equilibrium if the firm has no profit incentive to change r ∗

under the prices (p∗ , q ∗ ).

Theorem 1: p∗ , q ∗ , r ∗ are in equilibrium if and only if q ∗ is an optimal solution of (4.34):
Minimize (r ∗ )0 q
subject to A0 q ≥ B 0 p∗ (4.34)
q≥0.
Proof: Let c = B 0 p∗ . By definition, p∗ , q ∗ , r ∗ are in equilibrium iff for all fixed ∆ ∈ Rm ,
M (∆) ≤ M (0) where M (∆) is the maximum value of the LP (4.35):
Maximize c0 x − (q ∗ )0 ∆
subject to Ax ≤ r ∗ + ∆ , (4.35)
x≥0.
44 CHAPTER 4. LINEAR PROGRAMMING

For ∆ = 0, (4.34) becomes the dual of (4.35) so that by the strong duality theorem, M (0) = (r ∗ )0 q ∗ .
Hence p∗ , q ∗ , r ∗ are in equilibrium iff

c0 x − (q ∗ )0 ∆ ≤ M (0) = (r ∗ )0 q ∗ , (4.36)

whenever x is feasible for (4.35). By weak duality if x is feasible for (4.35) and q is feasible for
(4.34),

c0 x − (q ∗ )0 ∆ ≤ q 0 (r ∗ = ∆) − (q ∗ )0 ∆ , (4.37)

and, in particular, for q = q ∗ ,

c0 x − (q ∗ )0 ∆ ≤ (q ∗ )0 (r ∗ + ∆) − (q ∗ )0 ∆ = (q ∗ )0 r ∗ ♦

Remark 1: We have shown that (p∗ , q ∗ , r ∗ are in long-term equilibrium iff q ∗ is an optimum
solution to the dual (namely (4.34)) of (4.38):

Maximize c0 x
subject to Ax ≤ r ∗ (4.38)
x≥0.

This relation between p∗ , q ∗ , r ∗ has a very nice economic interpretation. Recall that c = B 0 p∗ , i.e.,
cj = p∗1 b1j + p∗2 b2j + . . . + p∗k bkj . Now bij is the amount of the ith output produced by operating the
jth activity at a unit level xj = 1. Hence, cj is the revenue per unit level operation of the jth activity
so that c0 x is the revenue when the n activities are operated at levels x. On the other hand if the jth
activity is operated at level xj = 1, it uses an amount aij of the ith input. If the ith input is valued at
X
m
a∗i , then the input cost of operating at xj = 1, is qi aij , so that the input cost of operating the n
i=1
activities at levels x is (A0 q ∗ )0 = (q ∗ )0 Ax. Thus, if x∗ is the optimum activity levels for (4.38) then
the output revenue is c0 x∗ and the input cost is (q ∗ )0 Ax∗ . But from (4.16), (q ∗ )0 (Ax∗ − r ∗ ) = 0 so
that

c0 x∗ = (q ∗ )0 r ∗ , (4.39)

i.e., at the optimum activity levels, in equilibrium, total revenues = total cost of input supplies. In
fact, we can say even more. From (4.15) we see that if x= astj > 0 then
X
m
cj = qi∗ aij ,
i=1

i.e., at the optimum, the revenue of an activity operated at a positive level = input cost of that activity.
Also if
X
m
cj < qi∗ aij ,
i=1

then x∗j= 0, i.e., if the revenue of an activity is less than its input cost, then at the optimum it is
operated at zero level. Finally, again from (4.15), if an equilibrium the optimum ith input supply ri∗
is greater than the optimum demand for the ith input,
4.4. LP THEORY OF A FIRM IN A COMPETITIVE ECONOMY 45

X
n
ri∗ > aij x∗j ,
j=1

then qi∗ = 0, i.e., the equilibrium price of an input which is in excess supply must be zero, in other
words it must be a free good.

Remark 2: Returning to the short-term decision problem (4.33), suppose that

(λ∗1 , . . . , λ∗` , λ∗`+1 , . . . , λ∗m ) is an optimum solution of the dual of (4.33). Suppose that the market
prices of inputs 1, . . . , ` are q1 , . . . , q` . Let us denote by M (∆1 , . . . , ∆` ) the optimum value of
(4.33) when the amounts of the inputs in fixed supply are r1∗ + ∆1 , . . . , r`∗ + ∆` . Then if
(∂M/∂∆i )|∆=0 exists, we can see from (4.22) that it is always profitable to increase the ith input
by buying some additional amount at price qi if λ∗i > qi , and conversely it is profitable to sell some
of the ith input at price qi if λ∗i < qi . Thus λ∗i can be interpreted as the firm’s internal valuation of
the ith input or the firm’s imputed or shadow price of the ith input. This interpretation has wide
applicability, which we mention briefly. Often engineering design problems can be formulated as
LPs of the form (4.10) or (4.19), where some of the coefficients bi are design parameters. The
design procedure is to fix these parameters at some nominal value b∗i , and carry out the
optimization problem. Suppose the resulting optimal dual variables are λ∗i . then we see (assuming
differentiability) that it is worth increasing b∗i if the unit cost of increasing this parameter is less
than λ∗i , and it is worth decreasing this parameter if the reduction in total cost per unit decrease is
greater than λ∗i .

4.4.4 Long-term equilibrium of a competitive, capitalist economy.

The profit-maximizing behavior of the firm presented above is one of the two fundamental building
blocks in the equilibrium theory of a competitive, capitalist economy. Unfortunately we cannot
present the details here. We shall limit ourselves to a rough sketch. We think of the economy as
a feedback process involving firms and consumers. Let us suppose that there are a total of h com-
modities in the economy including raw materials, intermediate and capital goods, labor, and finished
products. By adding zero rows to the matrices (A, B) characterizing a firm we can suppose that all
the h commodities are possible inputs and all the h commodities are possible outputs. Of course,
for an individual firm most of the inputs and most of the outputs will be zero. the sole purpose for
making this change is that we no longer need to distinguish between prices of inputs and prices of
outputs. We observe the economy starting at time T . At this time there exists within the economy
an inventory of the various commodities which we can represent by a vector ω = (ω1 , . . . , ωh ) ≥ 0.
ω is that portion of the outputs produced prior to T which have not been consumed up to T . We are
assuming that this is a capitalist economy, which means that the ownership of ω is divided among
the various consumers j = 1, . . . , J. More precisely, the jth consumer owns the vector of commodi-
XJ
ties ω(j) ≥ 0, and ω(j) = ω. We are including in ω(j) the amount of his labor services which
j=1
consumer j is willing to sell. Now suppose that at time T the prevailing prices of the h commodities
are λ = (λ1 , . . . , λh )0 ≥ 0. Next, suppose that the managers of the various firms assume that the
prices λ are not going to change for a long period of time. Then, from our previous analysis we
know that the manager of the ith firm will plan to buy input supplies r(i) ≥ 0, r(i) ∈ Rh , such
46 CHAPTER 4. LINEAR PROGRAMMING

that (λ, r(i)) is in long term equilibrium, and he will plan to produce an optimum amount, say y(i).
Here i = 1, 2, . . . , I, where I is the total number of firms. We know that r(i) and y(i) depend on
λ, so that we explicitly write r(i, λ), y(i, λ). We also recall that (see (4.38))

λ0 r(i, λ) = λ0 y(i, λ) , 1 ≤ i ≤ I . (4.40)

Now the ith manager can buy r(i) from only two sources: outputs from other firms, and the con-
sumers who collectively own ω. Similarly, the ith manager can sell his planned output y(i) either as
input supplies to other firms or to the consumers. Thus, the net supply offered for sale to consumers
is S(λ), where

X
J X
I X
i
S(λ) = ω(j) + y(i, λ) − r(i, λ) . (4.41)
j=1 i=1 i=1

We note two important facts. First of all, from (4.40), (4.41) we immediately conclude that

X
J
λ0 S(λ) = λ0 ω(j) , (4.42)
j=1

that is the value of the supply offered to consumers is equal to the value of the commodities (and
labor) which they own. The second point is that there is no reason to expect that S(λ) ≥ 0.
Now we come to the second building block of equilibrium theory. The value of the jth consumer’s
possessions is λ0 ω(j). The theory assumes that he will plan to buy a set of commodities d(j) =
(d1 (j), . . . , dh (j)) ≥ 0 so as to maximize his satisfaction subject to the constraint λ0 d(j) = λ0 ω(j).
Here also d(j) will depend on λ, so we write d(j, λ). If we add up the buying plans of all the
consumers we obtain the total demand

X
J
D(λ) = d(j, λ) ≥ 0 , (4.43)
j=1

which also satisfies

X
J
λ0 D(λ) = λ0 ω(j) . (4.44)
j=1

The most basic question of equilibrium theory is to determine conditions under which there exists a
price vector λE such that the economy is in equilibrium, i.e., S(λE ) = D(λE ), because if such an
equilibrium price λE exists, then at that price the production plans of all the firms and the buying
plan of all the consumers can be realized. Unfortunately we must stop at this point since we cannot
proceed further without introducing some more convex analysis and the fixed point theorem. For
a simple treatment the reader is referred to (Dorfman, Samuelson, and Solow [1958], Chapter 13).
For a much more general mathematical treatment see (Nikaido [1968], Chapter V).

4.5 Miscellaneous Comments

4.5. MISCELLANEOUS COMMENTS 47

4.5.1 Some mathematical tricks.

It is often the case in practical decision problems that the objective is not well-defined. There may
be a number of plausible objective functions. In our LP framework this situation can be formulated
as follows. The constraints are given as usual by Ax ≤ b, x ≥ 0. However, there are, say, k
objective functions (c1 )0 x, . . . , (ck )0 x. It is reasonable then to define a single objective function
f0 (x) by f0 (x) = minimum {(c1 )0 x, (c2 )0 x, . . . , (ck )0 x}, so that we have the decision problem,

Maximize f0 (x)
(4.45)
subject to Ax ≤ b, x ≥ 0 .

This is not a LP since f0 is not linear. However, the following exercise shows how to transform
(4.45) into an equivalent LP.

Exercise 1: Show that (4.45) is equivalent to (4.46) below, in the sense that x∗ is optimal for (4.45)
iff (x∗ , y ∗ ) = (x∗ , f0 (x∗ )) is optimal for (4.46).

Maximize y
subject to Ax ≤ b, x ≤ 0 (4.46)
y ≤ (ci )0 x , 1 ≤ i ≤ k .

Exercise 1 will also indicate how to do Exercise 2.

Exercise 2: Obtain an equivalent LP for (4.47):

X
n
Maximize ci (xi )
j=1
(4.47)
subject to Ax ≤ b, x ≤ 0 ,

where ci : R → R are concave, piecewise-linear functions of the kind shown in Figure 4.3.

The above-given assumption of the concavity of the ci is crucial. In the next exercise, the inter-
pretation of “equivalent” is purposely left ambiguous.

Exercise 3: Construct an example of the kind (4.47), where the ci are piecewise linear (but not
concave), and such that there is no equivalent LP.

It turns out however, that even if the ci are not concave, an elementary modification of the Simplex
algorithm can be given to obtain a “local” optimal decision. See (Miller [1963]).

4.5.2 Scope of linear programming.

LP is today the single most important optimization technique. This is because many decision prob-
lems can be adequately formulated as LPs, and, given the capabilities of modern computers, the
Simplex method (together with its variants) is an extremely powerful technique for solving LPs in-
volving thousands of variables. To obtain a feeling for the scope of LP we refer the reader to the
book by one of the originators of LP (Dantzig [1963]).
48 CHAPTER 4. LINEAR PROGRAMMING

ci (xi )

.
.

.
xi

Figure 4.3: A function of the form used in Exercise 2.

Chapter 5

OPTIMIZATION OVER SETS

DEFINED BY INEQUALITY
CONSTRAINTS: NONLINEAR
PROGRAMMING

In many decision-making situations the assumption of linearity of the constraint inequalities in LP

is quite restrictive. The linearity of the objective function is not restrictive as shown in the first
exercise below. In Section 1 we present the general nonlinear programming problem (NP) and
prove the Kuhn-Tucker theorem. Section 2 deals with Duality theory for the case where appropriate
convexity conditions are satisfied. Two applications are given. Section 3 is devoted to the important
special case of quadratic programming. The last section is devoted to computational considerations.

5.1 Qualitative Theory of Nonlinear Programming

5.1.1 The problem and elementary results.
The general NP is a decision problem of the form:

Maximize f0 (x)
(5.1)
subject to (x) ≤ 0 , i = 1, . . . , m,

where x ∈ Rn , fi : Rn → R, i = 0, 1, . . . , m, are differentiable functions. As in Chapter 4,

x ∈ Rn is said to be a feasible solution if it satisfies the constraints of (5.1), and Ω ⊂ Rn is the
subset of all feasible solutions; x∗ ∈ Ω is said to be an optimal decision or optimal solution if
f0 (x∗ ) ≥ f0 (x) for x ∈ Ω. From the discussion in 4.1.2 it is clear that equality constraints and sign
constraints on some of the components of x can all be transformed into the form (5.1). The next
exercise shows that we could restrict ourselves to objective functions which are linear; however, we
will not do this.

Exercise 1: Show that (5.2), with variables y ∈ R, x ∈ Rn , is equivalent to (5.1):

49
50 CHAPTER 5. NONLINEAR PROGRAMMING

Maximize y
(5.2)
subject to fi (x) ≤ 0, 1 ≤ i ≤ m, and y − f0 (x) ≤ 0 .

Returning to problem (5.1), we are interested in obtaining conditions which any optimal decision
must satisfy. The argument parallels very closely that developed in Exercise 1 of 4.1 and Exercise 1
of 4.2. The basic idea is to linearize the functions fi in a neighborhood of an optimal decision x∗ .

Definition: Let x be a feasible solution, and let I(x) ⊂ {1, . . . , m} be such that fi (x) = 0 for
ı ∈ I(x), fi (x) < 0 for i 6∈ I(x). (The set I(x) is called the set of active constraints at x.)
Definition: (i) Let x ∈ Ω. A vector h ∈ Rn is said to be an admissible direction for Ω at x if there
exists a sequence xk , k = 1, 2, . . . , in Ω and a sequence of numbers εk , k = 1, . . . , with εk > 0
for all k such that

lim x = x ,
k

k→∞

1
lim εk
(xk − x) = h .
k→∞

(ii) Let C(Ω, x) = {h|h is an admissible direction for Ω at x}. C(Ω, x) is called the tangent cone
of Ω at x. Let K(Ω, x) = {x + h|h ∈ C(Ω, x)}. (See Figures 5.1 and 5.2 and compare them with
Figures 4.1 and 4.2.)
If we take xk = x and εk = 1 for all k, we see that 0 ∈ C(Ω, x) so that the tangent cone is always
nonempty. Two more properties are stated below.

Exercise 2: (i) Show that C(Ω, x) is a cone, i.e., if h ∈ C(Ω, x) and θ ≥ 0, then θh ∈ C(Ω, x).
(ii) Show that C(Ω, x) is a closed subset of Rn . (Hint for (ii): For m = 1, 2, . . . , let hm and
{xmk , εmk > 0}∞ k=1 be such that x
mk → x and (1/εmk )(xmk − x) → hm as k → ∞. Suppose

that h → h as m → ∞. Show that there exist subsequences {xmkm , εmkm }∞

m
m=1 such that
x mk m
→ x and (1/ε mk m
)(x mk m
− x) → h as m → ∞.)

In the definition of C(Ω, x) we made no use of the particular functional description of Ω. The
following elementary result is more interesting in this light and should be compared with (2.18) in
Chapter 2 and Exercise 1 of 4.1.

Lemma 1: Suppose x∗ ∈ Ω is an optimum decision for (5.1).

Then

f0x (x∗ )h ≤ 0 for all h ∈ C(Ω, x∗ ) . (5.3)

Proof: Let xk ∈ Ω, εk > 0, k = 1, 2, 3, . . . , be such that

5.1. QUALITATIVE THEORY OF NONLINEAR PROGRAMMING 51

direction of
increasing
{x|f3 (x) = 0} payoff

π(k) =
{x|f0 (x) = k}
P
Q
x∗

{x|f2 (x) = 0}
{x|f1 (x) = 0}
Ω

R
,

Figure 5.1: Ω = P QR

1
k ∗
lim x = x , lim εk
(xk − x∗ ) = h . (5.4)
k→∞ k→∞

Note that in particular (5.4) implies

1
lim εk
|xk − x∗ | = |h| . (5.5)
k→∞

Since f0 is differentiable, by Taylor’s theorem we have

f0 (xk ) = f0 (x∗ + (xk − x∗ )) = f0 (x∗ ) + f0x (x∗ )(xk − x∗ ) + o(|xk − x∗ |) . (5.6)

Since xk ∈ Ω, and x∗ is optimal, we have f0 (xk ) ≤ f0 (x∗ ), so that

k −x∗ ) o(|xk −x∗ |)
0 ≥ f0x (x∗ ) (x εk
+ εk
.
Taking limits as k → ∞, using (5.4) and (5.5), we can see that

(xk −x∗ ) o(|xk −x∗ |) |xk −x∗ |

0≥ lim f0x (x∗ ) + lim |xk −x∗ | lim
εk εk
k→∞ k→∞ k→∞
= f0x (x∗ )h. ♦
52 CHAPTER 5. NONLINEAR PROGRAMMING

x∗

K(Ω, x∗ )

-
-
-
- - 0

C(Ω, x∗ )
-
-
-

Figure 5.2: C(Ω, x∗ ) is the tangent cone of Ω at x∗ .

The basic problem that remains is to characterize the set C(Ω, x∗ ) in terms of the derivatives of the
functions fi . Then we can apply Farkas’ Lemma just as in Exercise 1 of 4.2.

Lemma 2: Let x∗ ∈ Ω. Then

C(Ω, x∗ ) ⊂ {h|fix (x∗ )h ≤ 0 for all i ∈ I(x∗ )} . (5.7)

Proof: Let h ∈ Rn and xk ∈ Ω, εk > 0, k = 1, 2, . . . , satisfy (5.4). Since fi is differentiable, by

Taylor’s theorem we have

fi (xk ) = fi (x∗ ) + fix (x∗ )(xk − x∗ ) + o(|xk − x∗ |) .

Since xk ∈ Ω, fi (xk ) ≤ 0, and if i ∈ I(x∗ ), fi (x∗ ) = 0, so that fi (xk ) ≤ fi (x∗ ). Following the
proof of Lemma 1 we can conclude that 0 ≥ fix (x∗ )h. ♦

Lemma 2 gives us a partial characterization of C(Ω, x∗ ). Unfortunately, in general the inclusion

sign in (5.7) cannot be reversed. The main reason for this is that the set {fix (x∗ )|i ∈ I(x∗ )} is not
in general linearly independent.
Exercise 3: Let x ∈ R2 , f1 (x1 , x2 ) = (x1 − 1)3 + x2 , and f2 (x1 , x2 ) = −x2 . Let
(x∗1 , x∗2 ) = (1, 0). Then I(x∗ ) = {1, 2}. Show that
5.1. QUALITATIVE THEORY OF NONLINEAR PROGRAMMING 53

C(Ω, x∗ ) 6= {h|fix (x∗ )h ≤ 0 , i = 1, 2, }.

(Note that {f1x (x∗ ), f2x (x∗ )} is not a linearly independent set; see Lemma 4 below.)

5.1.2 Kuhn-Tucker Theorem.

Definition: Let x∗ ∈ Ω. We say that the constraint qualification (CQ) is satisfied at x∗ if
C(Ω, x) = {h|fix (x∗ )h ≤ 0 for all i ∈ I(x∗ )},
and we say that CQ is satisfied if CQ is satisfied at all x ∈ Ω. (Note that by Lemma 2 C(Ω, x) is
always a subset of the right-hand side.)
Compare the next result with Exercise 2 of 4.2.

Theorem 1: (Kuhn and Tucker [1951]) Let x∗ be an optimum solution of (5.1), and suppose that
CQ is satisfied at x∗ . Then there exist λ∗i ≥ 0, for i ∈ I(x∗ ), such that
X
f0x (x∗ ) = λ∗i fix (x∗ ) (5.8)
i∈I(x∗ )

Proof: By Lemma 1 and the definition of CQ it follows that f0x (x∗ )h ≤ 0 whenever fix (x∗ )h ≤ 0
for all i ∈ I(x∗ ). By the Farkas’ Lemma of 4.2.1 it follows that there exist λ∗i ≥ 0 for i ∈ I(x∗ )
such that (5.8) holds. ♦

In the original formulation of the decision problem we often have equality constraints of the form
rj (x) = 0, which get replaced by rj (x) ≤ 0, −rj (x) ≤ 0 to give the form (5.1). It is convenient in
application to separate the equality constraints from the rest. Theorem 1 can then be expressed as
Theorem 2.

Theorem 2: Consider the problem (5.9).

Maximize f0 (x)
subject to fi (x) ≤ 0 , i = 1, . . . , m, (5.9)
rj (x) = 0 , j = 1, . . . , k .

Let x∗ be an optimum decision and suppose that CQ is satisfied at x∗ . Then there exist λ∗i ≥ 0, i =
1, . . . , m, and µ∗j , j = 1, . . . , k such that

X
m X
k
f0x (x∗ ) = λ∗i fix (x∗ ) + µ∗j rjx (x∗ ) , (5.10)
i=1 j=1

and

λ∗i = 0 whenever fi (x∗ ) < 0 . (5.11)

Exercise 4: Prove Theorem 2.

54 CHAPTER 5. NONLINEAR PROGRAMMING

An alternative form of Theorem 1 will prove useful for computational purposes (see Section 4).
Theorem 3: Consider (5.9), and suppose that CQ is satisfied at an optimal solution x∗ . Define
ψ : Rn → R by

ψ(h) = max {−f0x (x∗ )h, f1 (x∗ ) + f1x (x∗ )h, . . . , fm (x∗ ) + fmx (x∗ )h} ,

and consider the decision problem

Minimize ψ(h)
subject to −ψ(h) − f0x (x∗ )h ≤ 0,
(5.12)
−ψ(h) + fi (x∗ ) + fix (x∗ )h ≤ 0 , 1 ≤ i ≤ m
−1 ≤ hi ≤ 1 , i = 1, . . . , n .
Then h = 0 is an optimal solution of (5.12).

Exercise 5: Prove Theorem 3. (Note that by Exercise 1 of 4.5, (5.12) can be transformed into a
LP.)
Remark: For problem (5.9) define the Lagrangian function L:
X
m X
k
(x1 , . . . , xn ; λ1 , . . . , λm ; µ1 , . . . , µk ) 7→ f0 (x) − λi fi (x) − µj rj (x).
i=1 j=1

Then Theorem 2 is equivalent to the following statement: if CQ is satisfied and x∗ is optimal, then
there exist λ∗ ≥ 0 and µ∗ such that Lx (x∗ , λ∗ , µ∗ ) = 0 and L(x∗ , λ∗ , µ∗ ) ≤ L(x∗ , λ, µ) for all
λ ≥ 0, µ.

There is a very important special case when the necessary conditions of Theorem 1 are also
sufficient. But first we need some elementary properties of convex functions which are stated as an
exercise. Some additional properties which we will use later are also collected here.
Recall the definition of convex and concave functions in 4.2.3.

Exercise 6: Let X ⊂ Rn be convex. Let h : X → R be a differentiable function. Then

(i) h is convex iff h(y) ≥ h(x) + hx (x)(y − x) for all x, y, in X,
(ii) h is concave iff h(y) ≤ h(x) + hx (x)(y − x) for all x, y in X,
(iii) h is concave and convex iff h is affine, i.e. h(x) ≡ α + b0 x for some
fixed α ∈ R, b ∈ Rn .
Suppose that h is twice differentiable. Then
(iv) h is convex iff hxx (x) is positive semidefinite for all x in X,
(v) h is concave iff hxx (x) is negative semidefinite for all x in X,
(vi) h is convex and concave iff hxx (x) ≡ 0.
Theorem 4: (Sufficient condition) In (5.1) suppose that f0 is concave and fi is convex for
i = 1, . . . , m. Then
(i) Ω is a convex subset of Rn , and
(ii) if there exist x∗ ∈ Ω, λ∗i ≥ 0, i ∈ I(x∗ ), satisfying (5.8), then x∗ is an optimal solution of
(5.1).
Proof:
(i) Let y, z be in Ω so that fi (y) ≤ 0, fi (z) ≤ 0 for i = 1, . . . , m. Let 0 ≤ θ ≤ 1. Since fi is
convex we have
5.1. QUALITATIVE THEORY OF NONLINEAR PROGRAMMING 55

fi (θy + (1 − θ)z) ≤ θfi (y) + (1 − θ)fi (z) ≤ 0 , 1 ≤ i ≤ m,

so that (θy + (1 − θ)z) ∈ Ω, hence Ω is convex.
(ii) Let x ∈ Ω be arbitrary. Since f0 is concave, by Exercise 6 we have
f0 (x) ≤ f0 (x∗ ) + f0x (x∗ )(x − x∗ ) ,
so that by (5.8)

X
f0 (x) ≤ f0 (x∗ ) + λ∗i fix (x∗ )(x − x∗ ) . (5.13)
i∈I(x∗ )

Next, fi is convex so that again by Exercise 6,

fi (x) ≥ fi (x∗ ) + fix (x∗ )(x − x∗ ) ;
but fi (x) ≤ 0, and fi (x∗ ) = 0 for i ∈ I(x∗ ), so that
fix (x∗ )(x − x∗ ) ≤ 0 for i ∈ I(x∗ ) . (5.14)
Combining (5.14) with the fact that λ∗i ≥ 0, we conclude from (5.13) that f0 (x) ≤ f0 (x∗ ), so that
x∗ is optimal. ♦
Exercise 7: Under the hypothesis of Theorem 4, show that the subset Ω∗ of Ω, consisting of all the
optimal solutions of (5.1), is a convex set.
Exercise 8: A function h : X → R defined on a convex set X ⊂ Rn is said to be strictly convex if
h(θy + (1 − θ)z) < θh(y) + (1 − θ)h(z) whenever 0 < θ < 1 and y, z are in X with y 6= z. h is
said to be strictly concave if −h is strictly convex. Under the hypothesis of Theorem 4, show that
an optimal solution to (5.1) is unique (if it exists) if either f0 is strictly concave or if the
fi , 1 ≤ i ≤ m, are strictly convex. (Hint: Show that in (5.13) we have strict inequality if x 6= x∗ .)

5.1.3 Sufficient conditions for CQ.

As stated, it is usually impractical to verify if CQ is satisfied for a particular problem. In this
subsection we give two conditions which guarantee CQ. These conditions can often be verified in
practice. Recall that a function g : Rn → R is said to be affine if g(x) ≡ α + b0 x for some fixed
α ∈ R and b ∈ Rn .
We adopt the formulation (5.1) so that
Ω = {x ∈ Rn |fi (x) ≤ 0 , 1 ≤ i ≤ m} .
Lemma 3: Suppose x∗ ∈ Ω and suppose there exists h∗ ∈ Rn such that for each i ∈ I(x∗ ), either
fix (x∗ )h∗ < 0, or fix (x∗ )h∗ = 0 and fi is affine. Then CQ is satisfied at x∗ .
Proof: Let h ∈ Rn be such that fix (x∗ )h ≤ 0 for i ∈ I(x∗ ). Let δ > 0. We will first show that
(h + δh∗ ) ∈ C(Ω, x∗ ). To this end let εk > 0, k = 1, 2, . . . , be a sequence converging to 0 and set
xk = x∗ + εk (h + δh∗ ). Clearly xk converges to x∗ , and (1/εk )(xk − x∗ ) converges to (h + δh∗ ).
Also for i ∈ I(x∗ ), if fix (x∗ )h < 0, then
fi (xk ) = fi (x∗ ) + εk fix (x∗ )(h + δh∗ ) + o(εk |h + δh∗ |)
≤ δεk fix (x∗ )h∗ + o(εk |h + δh∗ |)
< 0 for sufficiently large k ,
whereas for i ∈ I(x∗ ), if fi is affine, then
56 CHAPTER 5. NONLINEAR PROGRAMMING

fi (xk ) = fi (x∗ ) + εk fix (x∗ )(h + δh∗ ) ≤ 0 for all k .

Finally, for i 6∈ I(x∗ ) we have fi (x∗ ) < 0, so that fi (xk ) < 0 for sufficiently large k. Thus we
have also shown that xk ∈ Ω for sufficiently large k, and so by definition (h + δh∗ ) ∈ C(Ω, x∗ ).
Since δ > 0 can be arbitrarily small, and since C(Ω, x∗ ) is a closed set by Exercise 2, it follows that
h ∈ C(Ω, x∗ ). ♦

Exercise 9: Suppose x∗ ∈ Ω and suppose there exists x̂ ∈ Rn such that for each i ∈ I(x∗ ), either
fi (x∗ ) < 0 and fi is convex, or fi (x̂) ≤ 0 and fi is affine. Then CQ is satisfied at x∗ . (Hint: Show
that h∗ = x̂ − x∗ satisfies the hypothesis of Lemma 3.)
Lemma 4: Suppose x∗ ∈ Ω and suppose there exists h∗ ∈ Rn such that fix (x∗ )h∗ ≤ 0 for
i ∈ I(x∗ ), and {fix (x∗ )|i ∈ I(x∗ ), fix (x∗ )h∗ = 0} is a linearly independent set. Then CQ is
satisfied at x∗ .
Proof: Let h ∈ Rn be such that fix (x∗ )h ≤ 0 for all i ∈ I(x∗ ). Let δ > 0. We will show that
(h + δh∗ ) ∈ C(Ω, x∗ ). Let Jδ = {i|i ∈ I(x∗ ), fix (x∗ )(h + δh∗ ) = 0}, consist of p elements.
Clearly Jδ ⊂ J = {i|i ∈ I(x∗ ), fi x(x∗ )h∗ = 0}, so that {fix (x∗ , u∗ )|i ∈ Jδ } is linearly
independent. By the Implicit Function Theorem, there exist ρ > 0, an open set V ⊂ Rn containing
x∗ = (w∗ , u∗ ), and a differentiable function g : U → Rp , where U = {u ∈ Rn−p ||u − u∗ | < ρ},
such that

fi (w, u) = 0, i ∈ Jδ , and (w, u) ∈ V

iff

u ∈ U, and w = g(u) .

Next we partition h, h∗ as h = (ξ, η), h∗ = (ξ ∗ , η ∗ ) corresponding to the partition of x = (w, u).

Let εk > 0, k = 1, 2 . . . , be any sequence converging to 0, and set uk = u∗ + εk (η + δη ∗ ), wk =
g(uk ), and finally xk = (sk , uk ).
We note that uk converges to u∗ , so wk = g(uk ) converges to w∗ = g(u∗ ). Thus, xk converges
to x∗ . Now (1/εk )(xk − x∗ ) = (1/εk )(wk − w∗ , uk − u∗ ) = (1/εk )(g(uk ) − g(u∗ ), εk (η + δη ∗ )).
Since g is differentiable, it follows that (1/εk )(xk − x∗ ) converges to (gu (u∗ )(η + δη ∗ ), η + δη ∗ ).
But for i ∈ Jδ we have

0 = fix (x∗ )(h + δh∗ ) = fiw (x∗ )(ξ + δξ ∗ ) + fiu (x∗ )(η + δη ∗ ) . (5.15)

Also, for i ∈ Jδ , 0 = fi (g(u), u) for u ∈ U so that 0 = fiw (x∗ )gu (u∗ ) + fiu (x∗ ), and hence

0 = fiw (x∗ )gu (u∗ )(η + δη ∗ ) + fiu (x∗ )(η + δη ∗ ) . (5.16)

If we compare (5.15) and (5.16) and recall that {fiw (x∗ )|i ∈ Jδ } is a basis in Rp we can conclude
that (ξ + δξ ∗ ) = gu (u∗ )(η + δη ∗ ) so that (1/εk )(xk − x∗ ) converges to (h + hδh∗ ).
It remains to show that xk ∈ Ω for sufficiently large k. First of all, for i ∈ Jδ , fi (xk ) =
fi (g(uk ), uk ) = 0, whereas for i 6∈ Jδ , i ∈ I(x∗ ),

fi (xk ) = fi (x∗ ) + fix (x∗ )(xk − x∗ ) + o(|xk − x∗ |)

fi (x∗ ) + εk fix (x∗ )(h + δh∗ ) + o(εk ) + o(|xk − x∗ |),
5.2. DUALITY THEORY 57

and since fi (x∗ ) = 0 whereas fix (x∗ )(h + δh∗ ) < 0, we can conclude that fi (xk ) < 0 for suffi-
ciently large k. Thus, xk ∈ Ω for sufficiently large k. Hence, (h + δh∗ ) ∈ C(Ω, x∗ ).
To finish the proof we note that δ > 0 can be made arbitrarily small, and C(Ω, x∗ ) is closed by
Exercise 2, so that h ∈ C(Ω, x∗ ). ♦
The next lemma applies to the formulation (5.9). Its proof is left as an exercise since it is very
similar to the proof of Lemma 4.
Lemma 5: Suppose x∗ is feasible for S (5.9) and suppose there exists h∗ ∈ Rn such that the set
{fix (x )|i ∈ I(x ), fix (x )h = 0} {rjx (x )|j = 1, . . . , k} is linearly independent, and fix (x∗ )h∗ ≤
∗ ∗ ∗ ∗ ∗

0 for i ∈ I(x∗ ), rjx (x∗ )h∗ = 0 for 1 ≤ j ≤ k. Then CQ is satisfied at x∗ .

Exercise 10: Prove Lemma 5

5.2 Duality Theory

Duality theory is perhaps the most beautiful part of nonlinear programming. It has resulted in many
applications within nonlinear programming, in terms of suggesting important computational algo-
rithms, and it has provided many unifying conceptual insights into economics and management
science. We can only present some of the basic results here, and even so some of the proofs are
relegated to the Appendix at the end of this Chapter since they depend on advanced material. How-
ever, we will give some geometric insight. In 2.3 we give some application of duality theory and in
2.2 we refer to some of the important generalizations. The results in 2.1 should be compared with
Theorems 1 and 4 of 4.2.1 and the results in 4.2.3.
It may be useful to note in the following discussion that most of the results do not require differ-
entiability of the various functions.

5.2.1 Basic results.

Consider problem (5.17) which we call the primal problem:
Maximize f0 (x)
subject to fi (x) ≤ b̂i , 1 ≤ i ≤ m (5.17)
x∈X ,
where x ∈ Rn , fi : Rn → R, 1 ≤ i ≤ m, are given convex functions, f0 : Rn → R is a
given concave function, X is a given convex subset of Rn and b̂ = (b̂1 , . . . , b̂m )0 is a given vector.
For convenience, let f = (f1 , . . . , fm )0 : Rn → Rm . We wish to examine the behavior of the
maximum value of (5.17) as b̂ varies. So we define
Ω(b) = {x|x ∈ X, f (x) ≤ b}, B = {b|Ω(b) 6= φ},
and
S
M : B→R {+∞} by M (b) = sup{f0 (x)|x ∈ X, f (x) ≤ b}
= sup{f0 (x)|x ∈ Ω(b)} ,
so that in particular if x∗ is an optimal solution of (5.17) then M (b̂) = f0 (x̂). We need to consider
the following problem also. Let λ ∈ Rm , λ ≥ 0, be fixed.
Maximize f0 (x) − λ0 (f (x) − b̂)
(5.18)
subject to x ∈ X ,
58 CHAPTER 5. NONLINEAR PROGRAMMING

and define

m(λ) = sub{f0 (x) − λ0 (f (x) − b̂)|x ∈ X} .

Problem (5.19) is called the dual problem:

Minimize m(λ)
(5.19)
subject to λ ≥ 0 .

Let m∗ = inf {m(λ)|λ ≥ 0}.

Remark 1: The set X in (5.17) is usually equal to Rn and then, of course, there is no reason to
separate it out. However, it is sometimes possible to include some of the constraints in X in such
a way that the calculation of m(λ) by (5.18) and the solution of the dual problem (5.19) become
simple. For example see the problems discussed in Sections 2.3.1 and 2.3.2 below.
Remark 2: It is sometimes useful to know that Lemmas 1 and 2 below hold without any convexity
conditions on f0 , f, X. Lemma 1 shows that the cost function of the dual problem is convex which
is useful information since there are computation techniques which apply to convex cost functions
but not to arbitrary nonlinear cost functions. Lemma 2 shows that the optimum value of the dual
problem is always an upperSbound for the optimum value of the primal.
Lemma 1: m : R+ n → R {+∞} is a convex function. (Here Rn = {λ ∈ Rn |λ ≥ 0}.)
+

Exercise 1: Prove Lemma 1.

Lemma 2: (Weak duality) If x is feasible for (5.17), i.e., x ∈ Ω(b̂), and if λ ≥ 0, then

f0 (x) ≤ M (b̂) ≤ m∗ ≤ m(λ) . (5.20)

Proof: Since f (x) − b̂ ≤ 0, and λ ≥ 0, we have λ0 (f (x) − b̂) ≤ 0. So,

f0 (x) ≤ f0 (x) − λ0 (f (x) − b̂), for x ∈ Ω(b̂), λ ≥ 0 .

Hence

f0 (x) ≤ sup {f0 (x)|x ∈ Ω(b̂)} = M (b̂)

≤ sup {f0 (x) − λ0 (f (x) − b̂)|x ∈ Ω(b̂)} and since Ω(b̂) ⊂ X,
≤ sup {f0 (x) − λ0 (f (x) − b̂)|x ∈ X} = m(λ) .

Thus, we have

f0 (x) ≤ M (b̂) ≤ m(λ) for x ∈ Ω(b̂), λ ≥ 0 ,

and since M (b̂) is independent of λ, if we take the infimum with respect to λ ≥ 0 in the right-hand
inequality we get (5.20). ♦
The basic problem of Duality Theory is to determine conditions under which M (b̂) = m in ∗

(5.20). We first give a simple sufficiency condition.

Definition: A pair (x̂, λ̂) with x̂ ∈ X, and λ̂ ≤ 0 is said to satisfy the optimality conditions if
5.2. DUALITY THEORY 59

x̂ is optimal solution of (5.18) with λ = λ̂, (5.21)

x̂ is feasible for (5.17), i.e., fi (x̂) ≤ b̂i for i = 1, . . . , m , (5.22)

λ̂i = 0 when fi (x̂) < b̂i , equivalently, λ̂0 (f (x̂) − b̂) = 0. (5.23)

λ̂ ≥ 0 is said to be an optimal price vector if there is x̂ ∈ X such that (x̂, λ̂) satisfy the optimality
condition. Note that in this case x̂ ∈ Ω(b̂) by virtue of (5.22).
The next result is equivalent to Theorem 4(ii) of Section 1 if X = Rn , and fi , 0 ≤ i ≤ m, are
differentiable.
Theorem 1: (Sufficiency) If (x̂, λ̂) satisfy the optimality conditions, then x̂ is an optimal solution to
the primal, λ̂ is an optimal solution to the dual, and M (b̂) = m∗ .
Proof: Let x ∈ Ω(b̂), so that λ̂0 (f (x) − b̂) ≤ 0. Then

f0 (x) ≤ f0 (x) − λ̂0 (f (x) − b̂)

≤ sup{f0 (x) − λ̂0 (f (x) − b̂)|x ∈ X}
= f0 (x̂) − λ̂0 (f (x̂) − b̂) by (5.21)
= f0 (x̂) by (5.23)

so that x̂ is optimal for the primal, and hence by definition f0 (x̂) = M (b̂). Also

m(λ̂) = f0 (x̂) − λ̂0 (f (x̂) − b̂)

f0 (x̂) = M (b̂) ,

so that from Weak Duality λ̂ is optimal for the dual. ♦

We now proceed to a much more detailed investigation.S
Lemma 3: B is a convex subset of Rm , and M : B → R {+∞} is a concave function.
Proof: Let b, b̃ belong to B, let x ∈ Ω(b), x̃ ∈ Ω(b̃), let 0 ≤ θ ≤ 1. Then (θx + (1 − θ)x̃) ∈ X
since X is convex, and

fi (θx + (1 − θ)x̃) ≤ θfi (x) + (1 − θ)fi (x̃)

since fi is convex, so that

fi (θx + (1 − θ)x̃) ≤ θb + (1 − θ)b̃ , (5.24)

hence

(θx + (1 − θ)x̃) ∈ Ω(θb + (1 − θ)b̃)

and therefore, B is convex.

Also, since f0 is concave,

f0 (θx + (1 − θ)x̃) ≥ θf0 (x) + (1 − θ)f0 (x̃) .

60 CHAPTER 5. NONLINEAR PROGRAMMING

Since (5.24) holds for all x ∈ Ω(b) and x̃ ∈ Ω(b̃) it follows that
M (θb + (1 − θ)b̂) ≥ sup {f0 (θx + (1 − θ)x̃)|x ∈ Ω(b), x̃ ∈ Ω(b̃)}
≥ sup{f0 (x)|x ∈ Ω(b)} + (1 − θ) sup {f0 (x̃)|x̃ ∈ Ω(b̃)}
= θM (b) + (1 − θ)M (b̃). ♦
S
Definition: Let X ⊂ Rn and let g : X → R {∞, −∞}. A vector λ ∈ Rn is said to be a
supergradient (subgradient) of g at x̂ ∈ X if
g(x) ≤ g(x̂) + λ0 (x − x̂) for x ∈ X.
(g(x) ≥ g(x̂) + λ0 (x − x̂) for x ∈ X.)
(See Figure 5-3.)

M (b) M (b)

M (b̂) .
.b 6∈MB(b̂) .
b̂ b b̂ b
M is not stable at b̂ M is stable at b̂
M (b)
M (b̂) + λ0 (b − b̂)
-
-

.
-
-
-

b̂ b

, λ is a supergradient at b̂

Figure 5.3: Illustration of supergradient of stability.

S
Definition: The function M : B → R {∞} is said to be stable at b̂ ∈ B if there exists a real
number K such that
M (b) ≤ M (b̂) + K|b − b̂| for b ∈ B .
(In words, M is stable at b̂ if M does not increase infinitely steeply in a neighborhood of b̂. See
Figure 5.3.)
A more geometric way of thinking about subgradients is the following. Define the subset A ⊂
R1+m by
5.2. DUALITY THEORY 61

A = {(r, b)|b ∈ B, and r ≤ M (b)} .

Thus A is the set lying ”below” the graph of M . We call A the hypograph1 of M . Since M is
concave it follows immediately that A is convex (in fact these are equivalent statements).

Definition: A vector (λ0 , λ1 , . . . , λm ) is said to be the normal to a hyperplane supporting A at a

point(r̂, b̂) if

X
m X
m
λ0 r̂ + λi b̂i ≥ λ0 r + λi bi for all (r, b) ∈ A . (5.25)
i=1 i=1
P P
(In words, A lies below the hyperplane π̂ = {(r, b)|λ0 r+ λi bi = λ0 r̂+ λi bi }.) The supporting
hyperplane is said to be non-vertical if λ0 6= 0. See Figure 5.4.

Exercise 2: Show that if b̂ ∈ B, b̃ ≥ b̂, and r̃ ≤ M (b̂), then b̃ ∈ B, M (b̃), and (r̃, b̃) ∈ A.
Exercise 3: Assume that b̂ ∈ B, and M (b̂) < ∞. Show that (i) if λ = (λ1 , . . . , λm )0 is a
supergradient of M at b̂ then λ ≥ 0, and (1, −λ1 , . . . , −λm )0 defines a non-vertical hyperplane
supporting A at (M (b̂), b̂), (ii) if (λ0 , −λ1 , . . . , −λm )0 defines a hyperplane supporting A at
(M (b̂), b̂) then λ0 ≥ 0, λi ≥ 0 for 1 ≤ i ≤ m; futhermore, if the hyperplane is non-vertical then
((λ1 /λ0 , . . . , (λm /λ0 ))0 is a supergradient of M at b̂.

We will prove only one part of the next crucial result. The reader who is familiar with the
Separation Theorem of convex sets should be able to construct a proof for the second part based
on Figure 5.4, or see the Appendix at the end of this Chapter.

Lemma 4: (Gale [1967]) M is stable at b̂ iff M has a supergradient at b̂. Proof: (Sufficiency only)
Let λ be a supergradient at b̂, then

M (b) ≤ M (b̂) + λ0 (b − b̂)

≤ M (b̂) + |λ||b − b̂| . ♦

The next two results give important alternative interpretations of supergradients.

Lemma 5: Suppose that x̂ is optimal for (5.17). Then λ̂ is a supergradient of M at b̂ iff λ̂ is an
optimal price vector, and then (x̂, λ̂) satisfy the optimality conditions.
Proof: By hypothesis, f (x̂) = M (b̂), x̂ ∈ X, and f (x̂) ≤ b̂. Let λ̂ be a supergradient of M at b̂.
By Exercise 2, (M (b̂), f (x̂)) ∈ A and by Exercise 3, λ̂ ≥ 0 and

M (b̂) − λ̂0 b̂ ≥ M (b̂) − λ̂0 f (x̂) ,

so that λ̂0 (f (x̂) − b̂) ≥ 0. But then λ̂0 (b̂ − f (x̂)) = 0, giving (5.23). Next let x ∈ X. Then
(f0 (x), f (x)) ∈ A, hence again by Exercise 3

M (b̂) − λ̂0 b̂ ≥ f0 (x) − λ̂0 f (x) .

Since f0 (x̂) = M (b̂), and λ̂0 (f (x̂) − b̂) = 0, we can rewrite the inequality above as
1
From the Greek “hypo” meaning below or under. This neologism contrasts with the epigraph of a function which is
the set lying above the graph of the function.
62 CHAPTER 5. NONLINEAR PROGRAMMING

M (b)

M (b̂) . A

b
b̂
No non-vertical hyperplane supporting A at (M (b̂), b̂)
M (b)
π̂

M (b̂)
(λ0 , . . . , λm )
.
A

b̂ b
π̂ is a non-vertical hyperplane supporting A at (M (b̂), b̂)

Figure 5.4: Hypograph and supporting hyperplane.

f0 (x̂) + λ̂0 (f (x̂) − b̂) ≥ f0 (x) − λ̂0 (f (x) − b̂) ,

so that (5.21) holds. It follows that (x̂, λ̂) satisfy the optimality conditions.
Conversely, suppose x̂ ∈ X, λ̂ ≥ 0 satisfy (5.21), (5.22), and (5.23). Let x ∈ Ω(b), i.e.,
x ∈ X, f (x) ≤ b. Then λ̂0 (f (x) − b) ≤ 0 so that

f0 (x) ≤ f0 (x) λ̂0 (f (x) − b)

= f0 (x) − λ̂0 (f (x) − b̂) + λ̂0 (b − b̂)
≤ f0 (x̂) − λ̂0 (f (x̂) − b̂) + λ̂0 (b − b̂) by (5.21)
= f0 (x̂) + λ̂0 (b − b̂) by (5.23)
= M (b̂) + λ̂0 (b − b̂) .

Hence
M (b) = sup{f0 (x)|x ∈ Ω(b)} ≤ M (b̂) + λ̂0 (b − b̂) ,
so that λ̂0 is a supergradient of M at b̂. ♦
Lemma 6: Suppose that b̂ ∈ B, and M (b̂) < ∞. Then λ̂ is a supergradient of M at b̂ iff λ̂ is an
optimal solution of the dual (5.19) and m(λ̂) = M (b̂).
Proof: Let λ̂ be a supergradient of M at b̂. Let x ∈ X. By Exercises 2 and 3
5.2. DUALITY THEORY 63

M (b̂) − λ̂0 b̂ ≥ f0 (x) − λ̂0 f (x)

or
M (b̂) ≥ f0 (x) − λ̂0 (f (x) − b̂) ,
so that
M (b̂) ≥ sup{f0 (x) − λ̂0 (f (x) − b̂)|x ∈ X} = m(λ̂) .
By weak duality (Lemma 2) it follows that M (b̂) = m(λ̂) and λ̂ is optimal for (5.19).
Conversely suppose λ̂ ≥ 0, and m(λ̂) = M (b̂). Then for any x ∈ X
M (b̂) ≥ f0 (x) − λ̂0 (f (x) − b̂) ,
and if moreover f (x) ≤ b, then λ̂0 (f (x) − b) ≤ 0, so that

M (b̂) ≥ f0 (x) − λ̂0 (f (x) − b̂) + λ̂0 (f (x) − b)

= f0 (x) − λ̂0 b + λ̂0 b̂ for x ∈ Ω(b) .

Hence,
M (b) = sup{f0 (x)|x ∈ Ω(b)} ≤ M (b̂) + λ̂0 (b − b̂) ,
so that λ̂ is a supergradient. ♦
We can now summarize our results as follows.
Theorem 2: (Duality) Suppose b̂ ∈ B, M (b̂) < ∞, and M is stable at b̂. Then
(i) there exists an optimal solution λ̂ for the dual, and m(λ̂) = M (b̂),
(ii) λ̂ is optimal for the dual iff λ̂ is a supergradient of M at b̂,
(iii) if λ̂ is any optimal solution for the dual, then x̂ is optimal for the primal iff (x̂, λ̂) satisfy the
optimality conditions of (5.21), (5.22), and (5.23).

Proof: (i) follows from Lemmas 4,6. (ii) is implied by Lemma 6. The “if” part of (iii) follows from
Theorem 1, whereas the “only if” part of (iii) follows from Lemma 5. ♦
Corollary 1: Under the hypothesis of Theorem 2, if λ̂ is an optimal solution to the dual then
(∂M + /∂bi )(b̂) ≤ λ̂i ≤ (∂M − /∂bi )(b̂).
Exercise 4: Prove Corollary 1. (Hint: See Theorem 5 of 4.2.3.)

5.2.2 Interpretation and extensions.

It is easy to see using convexity properties that, if X = Rn and fi , 0 ≤ i ≤ m, are differentiable,
then the optimality conditions (5.21), (5.22), and (5.23) are equivalent to the Kuhn-Tucker condition
(5.8). Thus the condition of stability of M at b̂ plays a similar role to the constraint qualification.
However, by Lemmas 4, 6 stability is equivalent to the existence of optimal dual variables, whereas
CQ is only a sufficient condition. In other words if CQ holds at x̂ then M is stable at b̂. In particular,
if X = Rn and the fi are differentiable, the various conditions of Section 1.3 imply stability. Here
we give one sufficient condition which implies stability for the general case.
Lemma 7: If b̂ is in the interior of B, in particular if there exists x ∈ X such that fi (x) < b̂i for
1 ≤ i ≤ m, then M is stable at b̂.
64 CHAPTER 5. NONLINEAR PROGRAMMING

The proof rests on the Separation Theorem for convex sets, and only depends on the fact that M
is concave, M (b̂) < ∞ without loss of generality, and b̂ is the interior of B. For details see the
Appendix.
Much of duality theory can be given an economic interpretation similar to that in Section 4.4.
Thus, we can think of x as the vector of n activity levels, f0 (x) the corresponding revenue, X as
constraints due to physical or long-term limitations, b as the vector of current resource supplies,
and finally f (x) the amount of these resources used up at activity levels x. The various convexity
conditions are generalizations of the economic hypothesis of non-increasing returns-to-scale. The
primal problem (5.17) is the short-term decision problem faced by the firm. Next, if the current
resources can be bought or sold at prices λ̂ = (λ1 , . . . , λm )0 , the firm faces the decision problem
(5.18). If for a price system λ̂, an optimal solution of (5.17) also is an optimal solution for (5.18),
then we can interpret λ̂ as a system of equilibrium prices just as in 4.2. Assuming the realistic
condition b̂ ∈ B, M (b̂) < ∞ we can see from Theorem 2 and its Corollary 1 that there exists
an equilibrium price system iff (∂M + /∂bi )(b̂) < ∞, 1 ≤ i ≤ m; if we interpret (∂M + /∂bi )(b̂)
as the marginal revenue of the ith resource, we can say that equilibrium prices exist iff marginal
productivities of every (variable) resource is finite. These ideas are developed in (Gale [1967]).

M (b)

M (b̂) .
A

b̂ b

Figure 5.5: If M is not concave there may be no supporting hyperplane at (M (b̂), b̂).

Referring to Figure 5.3 or Figure 5.4, and comparing with Figure 5.5 it is evident that if M is not
concave or, equivalently, if its hypograph A is not convex, there may be no hyperplane supporting A
at (M (b̂), b̂). This is the reason why duality theory requires the often restrictive convexity hypoth-
esis on X and fi . It is possible to obtain the duality theorem under conditions slightly weaker than
convexity but since these conditions are not easily verifiable we do not pursue this direction any fur-
ther (see Luenberger [1968]). A much more promising development has recently taken place. The
basic idea involved is to consider supporting A at (M (b̂), b̂) by (non-vertical) surfaces π̂ more gen-
eral than hyperplanes; see Figure 5.6. Instead of (5.18) we would then have more general problem
of the form (5.26):

Maximize f0 (x) − F (f (x) − b̂)

(5.26)
subject to x ∈ X ,
5.2. DUALITY THEORY 65

where F : Rm → R is chosen so that π̂ (in Figure 5.6) is the graph of the function b 7→ M (b̂) −
F (b − b̂). Usually F is chosen from a class of functions φ parameterized by µ = (µ1 , . . . , µk ) ≥ 0.
Then for each fixed µ ≥ 0 we have (5.27) instead of (5.26):

Maximize f0 (x) − φ(µ; f (x) − b̂)

(5.27)
subject to x ∈ X .

M (b) π̂

M (b̂) .
A

b̂ b

Figure 5.6: The surface π̂ supports A at (M (b̂), b̂).

If we let
ψ(µ) =sup{f0 (x) − φ(µ; f (x) − b̂)|x ∈ X} .
then the dual problem is

Minimize ψ(µ)
subject to µ ≥ 0 ,

in analogy with (5.19).

The economic interpretation of (5.27) would be that if the prevailing (non-uniform) price system
is φ(µ; ·) then the resources f (x) − b̂ can be bought (or sold) for the amount φ(µ; f (x) − b̂). For
such an interpretation to make sense we should have φ(µ; b) ≥ 0 for b ≥ 0, and φ(µ; b) ≥ φ(µ; b̃)
whenever b ≥ b̃. A relatively unnoticed, but quite interesting development along these lines is
presented in (Frank [1969]). Also see (Arrow and Hurwicz [1960]).
For non-economic applications, of course, no such limitation on φ is necessary. The following
references are pertinent: (Gould [1969]), (Greenberg and Pierskalla [1970]), (Banerjee [1971]). For
more details concerning the topics of 2.1 see (Geoffrion [1970a]) and for a mathematically more
elegant treatment see (Rockafellar [1970]).

5.2.3 Applications.
Decentralized resource allocation.
Parts (i) and (iii) of Theorem 2 make duality theory attractive for computation purposes. In particular
from Theorem 2 (iii), if we have an optimal dual solution λ̂ then the optimal primal solutions are
those optimal solutions of (5.18) for λ = λ̂ which also satisfy the feasibility condition (5.22) and
66 CHAPTER 5. NONLINEAR PROGRAMMING

the “complementary slackness” condition (5.23). This is useful because generally speaking (5.18)
is easier to solve than (5.17) since (5.18) has fewer constraints.
Consider a decision problem in a large system (e.g., a multi-divisional firm). The system is
made up of k sub-systems (divisions), and the decision variable of the ith sub-system is a vector
xi ∈ Rni , 1 ≤ i ≤ k. The sub-system has individual constraints of the form xi ∈ X i where xi is
a convex set. Furthermore, the sub-systems share some resources in common and this limitation is
expressed as f 1 (x1 ) + . . . + f k (xk ) ≤ b̂ where f i : Rni → Rm are convex functions and b̂ ∈ Rm
is the vector of available common resources. Suppose that the objective function of the large system
is additive, i.e. it is the form f01 (x1 ) + . . . + f0k (xk ) where f0i : Rni → R are concave functions.
Thus we have the decision problem (5.28):

X
k
Maximize f0i (xi )
i=1
subject to xi ∈ X i , 1 ≤ i ≤ k, (5.28)
Xk
f i (xi ) ≤ b̂ .
i=1

For λ ∈ Rm , λ ≥ 0, the problem corresponding to (5.19) is

Xk
Maximize f0i (xi ) − λ0 f i (xi ) − λ0 ( f i (xi ) − b̂)
i=1
subject to xi ∈ X i , 1 ≤ i ≤ k ,

which decomposes into k separate problems:

Maximize f0i (xi ) − λ0 f i (xi )

(5.29)
subject to xi ∈ Xi , 1 ≤ i ≤ k .

X
k
If we let mi (λ) = sup{f0i (xi ) − λ0 f i (xi )|xi ∈ X i }, and m(λ) = mi (λ) + λ0 b̂, then the dual
i=1
problem is

Minimize m(λ) ,
(5.30)
subject to λ ≥ 0 .

Note that (5.29) may be much easier to solve than (5.28) because, first of all, (5.29) involves fewer
constraints, but perhaps more importantly the decision problems in (5.29) are decentralized whereas
in (5.28) all the decision variables x1 , . . . , xk are coupled together; in fact, if k is very large it may
be practically impossible to solve (5.28) whereas (5.29) may be trivial if the dimensions of xi are
small.
Assuming that (5.28) has an optimal solution and the stability condition is satisfied, we need to
find an optimal dual solution so that we can use Theorem 2(iii). For simplicity suppose that the
f0i , 1 ≤ i ≤ k, are strictly concave, and also suppose that (5.29) has an optimal solution for every
λ ≥ 0. Then by Exercise 8 of Section 1, for each λ ≥ 0 there is a unique optimal solution of (5.29),
say xi (λ). Consider the following algorithm.
5.2. DUALITY THEORY 67

Step 1. Select λ0 ≥ 0 arbitrary. Set p = 0, and go to Step 2.

Step 2. Solve (5.29) for λ = λp and obtain the optimal solution xp = (x1 (λp ), . . . , xk (λp )).
Xk
Compute ep = f i (xi (λp )) − b̂. If ep ≥ 0, xp is feasible for (5.28) and can easily be seen to be
i=1
optimal.
Step 3. Set λp=1 according to

λpi if epi ≥ 0
λp+1 =
i λi − d ei if epi < 0
p p p

where dp > 0 is chosen a priori. Set p = p + 1 and return to Step 3.

It can be shown that if the step sizes dp are chosen properly, xp will converge to the optimum
solution of (5.28). For more detail see (Arrow and Hurwicz [1960]), and for other decentralization
schemes for solving (5.28) see (Geoffrion [1970b]).

Control of water quality in a stream.

The discussion in this section is mainly based on (Kendrick, et al., [1971]). For an informal discus-
sion of schemes of pollution control which derive their effectiveness from duality theory see (Solow
[1971]). See (Dorfman and Jacoby [1970].)
Figure 5.7 is a schematic diagram of a part of a stream into which n sources (industries and
municipalities) discharge polluting effluents. The pollutants consist of various materials, but for
simplicity of exposition we assume that their impact on the quality of the stream is measured in
terms of a single quantity, namely the biochemical oxygen demand (BOD) which they place on the
dissolved oxygen (DO) in the stream. Since the DO in the stream is used to breakdown chemically
the pollutants into harmless substances, the quality of the stream improves with the amount of
DO and decreases with increasing BOD. It is a well-advertized fact that if the DO drops below a
certain concentration, then life in the stream is seriously threatened; indeed, the stream can “die.”
Therefore, it is important to treat the effluents before they enter the stream in order to reduce the
BOD to concentration levels which can be safely absorbed by the DO in the stream. In this example
we are concerned with finding the optimal balance between costs of waste treatment and costs of
high BOD in the stream.
We first derive the equations which govern the evolution in time of BOD and DO in the n areas
of the streams. The fluctuations of BOD and DO will be cyclical with a period of 24 hours. Hence,
it is enough to study the problem over a 24-hour period. We divide this period into T intervals,
t = 1, . . . , T . During interval t and in area i let
zi (t) = concentration of BOD measured in mg/liter,
qi (t) = concentration of DO measured in mg/liter,
si (t) = concentration of BOD of effluent discharge in mg/liter, and
mi (t) = amount of effluent discharge in liters.
The principle of conservation of mass gives us equations (5.31) and (5.32):
ψi−1 zi−1 (t) ψi zi (t) si (t)mi (t)
zi (t + 1) − zi (t) = −αi zi (t) + vi − vi + vi , (5.31)

(t)
qi (t + 1) − qi (t) = βi (qis − qi (t)) + ψi−1 qvi−1 − ψi qvii(t)
i (5.32)
+αi zi (t) − ηi vi , t = 1, . . . , T and i = 1, . . . , N.
68 CHAPTER 5. NONLINEAR PROGRAMMING

direction of flow

0 1 i−1 i i+1 N N +1

z0 z1 ...... zi−1 zi zi+1 . . . zN

q0 q1 qi−1 qi qi+1 qN

(1 − π1 )si 1 − πi−1 (1 − πi )si(1 − πi+1 )si+1 (1 − πN )sN

given

si si−a si si+1 sN

Figure 5.7: Schematic of stream with effluent discharges.

Here, vi = volume of water in area i measured in liters, ψi = volume of water which flows from
area i to are i + 1 in each period measured in liters. αi is the rate of decay of BOD per interval. This
decay occurs by combination of BOD and DO. βi is the rate of generation of DO. The increase in
DO is due to various natural oxygen-producing biochemical reactions in the stream and the increase
is proportional to (q s − qi ) where q s is the saturation level of DO in the stream. Finally, ηi is the
DO requirement in the bottom sludge. The vi , ψi , αi , ηi , q s are parameters of the stream and are
assumed known. They may vary with the time interval t. Also z0 (t), q0 (t) which are the concen-
trations immediately upstream from area 1 are assumed known. Finally, the initial concentrations
zi (1), qi (1), i = 1, . . . , N are assumed known.
Now suppose that the waste treatment facility in area i removes in interval t a fraction πi (t) of
the concentration si (t) of BOD. Then (5.31) is replaced by

ψi zi−1 ψi zi (t) (1−πi (t))si (t)mi (t)

zi (t + 1) − zi (t) = −αi zi (t) + vi − vi + vi . (5.33)

We now turn to the costs associated with waste treatment and pollution. The cost of waste treat-
ment can be readily identified. In period t the ith facility treats mi (t) liters of effluent with a BOD
concentration si (t) mg/liter of which the facility removes a fraction πi (t). Hence, the cost in period
t will be fi (πi (t), si (t), mi (t)) where the function must be monotonically increasing in all of its
arguments. We further assume that f is convex.
The costs associated with increased amounts of BOD and reduced amounts of DO are much
more difficult to quantify since the stream is used by many institutions for a variety of purposes
(e.g., agricultural, industrial, municipal, recreational), and the disutility caused by a decrease in
the water quality varies with the user. Therefore, instead of attempting to quantify these costs let
us suppose that some minimum water quality standards are set. Let q be the minimum acceptable
DO concentration and let z̄ be the maximum permissible BOD concentration. Then we face the
5.2. DUALITY THEORY 69

following NP:

X
N X
T
Maximize − fi (πi (t), si (t), mi (t))
i=1 t=1
subject to (5.32), (5.33), and (5.34)
−qi (t) ≤ −q , i = 1, . . . , N ; t = 1, . . . , T,
zi (t) ≤ z̄ , i = 1, . . . , N ; t = 1, . . . , T,
0 ≤ πi (t) ≤ 1 , i = 1, . . . , N ; t = 1, . . . , T.
Suppose that all the treatment facilities are in the control of a single public agency. Then assuming
that the agency is required to maintain the standards (q, z̄) and it does this at a minimum cost it will
solve the NP (5.34) and arrive at an optimal solution. Let the minimum cost be m(q, z̄). But if
there is no such centralized agency, then the individual polluters may not (and usually do not) have
any incentive to cooperate among themselves to achieve these standards. Furthermore, it does not
make sense to enforce legally a minimum standard qi (t) ≥ q, zi (t) ≤ z̄ on every polluter since the
pollution levels in the ith area depend upon the pollution levels on all the other areas lying upstream.
On the other hand, it may be economically and politically acceptable to tax individual polluters in
proportion to the amount of pollutants discharged by the individual. The question we now pose
is whether there exist tax rates such that if each individual polluter minimizes its own total cost
(i.e., cost of waste treatment + tax on remaining pollutants), then the resulting water quality will be
acceptable and, furthermore, the resulting amount of waste treatment is carried out at the minimum
expenditure of resources (i.e., will be an optimal solution of (5.34)).
It should be clear from the duality theory that the answer is in the affirmative. To see this let
wi (t) = (zi (t), −qi (t))0 , let w(t) = (w1 (t), . . . , wN (t)), and let w = (w(1), . . . , w(t)). Then we
can solve (5.32) and (5.33) for w and obtain

w = b + Ar , (5.35)

where the matrix A and the vector b depend upon the known parameters and initial conditions, and
r is the NT-dimensional vector with components (1 − πi (t))si (t)mi (t). Note that the coefficients
of the matrix must be non-negative because an increase in any component of r cannot decrease the
BOD levels and cannot increase the DO levels. Using (5.35) we can rewrite (5.34) as follows:
XX
Maximize − fi (πi (t), si (t), mi (t))
i t
(5.36)
subject to b + Ar ≤ w̄ ,
0 ≤ πi (t) ≤ 1 , i = 1, . . . , N ; t = 1, . . . , T,
where the 2N T -dimensional vector w̄ has its components equal to −q or z̄ in the obvious manner.
By the duality theorem there exists a 2N T -dimensional vector λ∗ ≥ 0, and an optimal solution
πi∗ (t), i = 1, . . . , N, t = 1, . . . , T , of the problem:
XX
Maximize − fi (πi (t), si (t), mi (t)) − λ∗0 (b + Ar − w)
i t (5.37)
subject to 0 ≤ πi (t) ≤ 1, i = 1, . . . , N ; t = 1, . . . , T ,

such that {πi∗ (t)} is also an optimal solution of (5.36) and, furthermore, the optimal values of (5.36)
and (5.37) are equal. If we let p∗ = A0 λ∗ ≥ 0, and we write the components of p∗ as p∗i (t) to match
70 CHAPTER 5. NONLINEAR PROGRAMMING

with the components (1 − πi (t))si (t)mi (t) of r we can see that (5.37) is equivalent to the set of N T
problems:
Maximize − fi (πi (t), si (t), mi (t)) − p∗i (t)(1 − πi (t))si (t)mi (t)
0 ≤ πi (t) ≤ 1 , (5.38)
i = 1, . . . , N ; t = 1, . . . , T .
Thus, p∗i (t) is optimum tax per mg of BOD in area i during period t.
Before we leave this example let us note that the optimum dual variable or shadow price λ∗
plays an important role in a larger framework. We noted earlier that the quality standard (q, z̄)
was somewhat arbitrary. Now suppose it is proposed to change the standard in the ith area during
period t to q + ∆qi (t) and z̄ + ∆zi (t). If the corresponding components of λ∗ are λq∗
i (t) and λi (t),
z∗

then the change in the minimum cost necessary to achieve the new standard will be approximately
λq∗
i (t)∆qi (t) + λi (t)∆zi (t). This estimate can now serve as a basis in making a benefits/cost
z∗

analysis of the proposed new standard.

5.3 Quadratic Programming

An important special case of NP is the quadratic programming (QP) problem:
Maximize c0 x − 12 x0 P x
(5.39)
subject to Ax ≤ b, x ≥ 0 ,
where x ∈ Rn is the decision variable , c ∈ Rn , b ∈ Rm are fixed, A is a fixed m × n matrix and
P = P 0 is a fixed positive semi-definite matrix.
Theorem 1: A vector x∗ ∈ Rn is optimal for (5.39) iff there exist λ∗ ∈ Rm , µ∗ ∈ Rn , such that
Ax∗ ≤ b, x∗ ≥ 0
c − P x∗ = A0 λ∗ − µ∗ , λ∗ ≥ 0, µ∗ ≥ 0 , (5.40)
(λ∗ )0 (Ax∗ − b) = 0 , (µ∗ )0 x∗ = 0 .
Proof: By Lemma 3 of 1.3, CQ is satisfied, hence the necessity of these conditions follows from
Theorem 2 of 1.2. On the other hand, since P is positive semi-definite it follows from Exercise 6
of Section 1.2 that f0 : x 7→ c0 x − 1/2 x0 P x is a concave function, so that the sufficiency of these
conditions follows from Theorem 4 of 1.2. ♦
From (5.40) we can see that x∗ is optimal for (5.39) iff there is a solution (x∗ , y ∗ , λ∗ , µ∗ ) to
(5.41), (5.42), and (5.43):
Ax + Im Y = b
(5.41)
−P x − A0 λ + In µ = −c ,
x ≥ 0 y ≥ 0, λ ≥ 0, µ ≥ 0 , (5.42)

µ 0 x = 0 , λ0 y = 0 . (5.43)
Suppose we try to solve (5.41) and (5.42) by Phase I of the Simplex algorithm (see 4.3.2). Then we
must apply Phase II to the LP:
X
m X
n
Maximize − zi − ξj
i=1 j=1
5.4. COMPUTATIONAL METHOD 71

subject to
Ax + Im y +z =b
(5.44)
−P x − A0 λ + In µ + ξ = −c
x ≥ 0, y ≥ 0, λ ≥ 0, µ ≥ 0, z ≥ 0, ξ ≥ 0,

starting with a basic feasible solution z = b, ξ = −c. (We have assumed, without loss of generality,
that b ≥ 0 and −c ≥ 0.) If (5.41) and (5.42) have a solution then the maximum value in (5.44) is 0.
We have the following result.
Lemma 1: If (5.41), (5.42), and (5.43) have a solution, then there is an optimal basic feasible solution
of (5.44) which is also a solution f (5.41), (5.42), and (5.43).
Proof: Let x̂, ŷ, λ̂, µ̂ be a solution of (5.41), (5.42), and (5.43). Then x̂, ŷ, λ̂, µ̂, ẑ = 0, ξˆ = 0 is
an optimal solution of (5.44). Furthermore, from (5.42) and (5.43) we see that at most (n + m)
components of (x̂, ŷ, λ̂, µ̂) are non-zero. But then a repetition of the proof of Lemma 1 of 4.3.1 will
also prove this lemma. ♦
This lemma suggests that we can apply the Simplex algorithm of 4.3.2 to solve (5.44), starting
with the basic feasible solution z = b, ξ = −c, in order to obtain a solution of (5.41), (5.42), and
(5.43). However, Step 2 of the Simplex algorithm must be modified as follows to satisfy (5.43):
If a variable xj is currently in the basis, do not consider µj as a candidate for entry into the basis;
if a variable yi is currently in the basis, do not consider λi as a candidate for entry into the basis. If
it not possible to remove the zi and ξj from the basis, stop.
The above algorithm is due to Wolfe [1959]. The behavior of the algorithm is summarized below.
Theorem 2: Suppose P is positive definite. The algorithm will stop in a finite number of steps at an
optimal basic feasible solution (x̂, ŷ, λ̂, µ̂, ẑ, ξ̂) of (5.44). If ẑ = 0 and ξˆ = 0 then (x̂, ŷ, λ̂, µ̂) solve
(5.41), (5.42), and (5.43) and x̂ is an optimal solution of (5.39). If ẑ 6= 0 or ξ̂ 6= 0, then there is no
solution to (5.41), (5.42), (5.43), and there is no feasible solution of (5.39).
For a proof of this result as well as for a generalization of the algorithm which permits positive
semi-definite P see (Cannon, Cullum, and Polak [1970], p. 159 ff).

5.4 Computational Method

We return to the general NP (5.45),

Maximize f0 (x)
(5.45)
subject to fi (x) ≤ 0, i = 1, . . . , m ,

where x ∈ Rn , fi : Rn → R, 0 ≤ i ≤ m, are differentiable. Let Ω ⊂ Rn denote the set of

feasible solutions. For x̂ ∈ Ω define the function ψ(x̂) : Rn → R by

ψ(x̂)(h) = max{−f0x (x̂)h, f1 (x̂) + f1x (x̂)h, . . . , fm (x̂) + fmx (x̂)h}.

Consider the problem:

Minimize ψ(x̂)(h)
subject to − ψ(x̂)(h) − f0x (x̂)h ≤ 0 ,
(5.46)
−ψ(x̂)(h) + fi (x̂)fix h ≤ 0 ,
1 ≤ i ≤ m , −1 ≤ hj ≤ 1 , 1 ≤ j ≤ n .
72 CHAPTER 5. NONLINEAR PROGRAMMING

5f0 (xk )f0 (x) = F0 (x∗ ) > f0 (xk )

f0 (x) = f0 (xk )
5f1 (xk )
f2 = 0
.
h(xk )
5f3 (xk ) xk
f1 = 0
5f2 (xk )

Ω
f3 = 0

Figure 5.8: h(xk ) is a feasible direction.

Call h(x̂) an optimum solution of (5.46) and let h0 (x̂) = ψ(x̂)(h(x̂)) be the minimum value at-
tained. (Note that by Exercise 1 of 4.5.1 (5.46) can be solved as an LP.)
The following algorithm is due to Topkis and Veinott [1967].
Step 1. Find x0 ∈ Ω, set k = 0, and go to Step 2.
Step 2. Solve (5.46) for x̂ = xk and obtain h0 (xk ), h(xk ). If h0 (xk ) = 0, stop, otherwise go to Step
3.
Step 3. Compute an optimum solution µ(xk ) to the one-dimensional problem,

Maximize f0 (xk + µh(xk )) ,

subject to (xk + µh(xk )) ∈ Ω, µ ≥ 0 ,

and go to Step 4.
Step 4. Set xk+1 = xk + µ(xk )h(xk ), set k = k + 1 and return to Step 2.
The performance of the algorithm is summarized below.
Theorem 1: Suppose that the set

Ω(x0 ) = {x|x ∈ Ω, f0 (x) ≥ f0 (x0 )}

is compact, and has a non-empty interior, which is dense in Ω(x0 ). Let x∗ be any limit point of
the sequence x0 , x1 , . . . , xk , . . . , generated by the algorithm. Then the Kuhn-Tucker conditions are
satisfied at x∗ .
For a proof of this result and for more efficient algorithms the reader is referred to (Polak [1971]).
Remark: If h0 (xk ) < 0 in Step 2, then the direction h(xk ) satisfies f0x (xk )h(xk ) > 0, and fi (xk )+
fix (xK )h(xk ) < 0, 1 ≤ i ≤ m. For this reason h(xk ) is called a (desirable) feasible direction.
(See Figure 5.8.)
5.5. APPENDIX 73

5.5 Appendix
The proofs of Lemmas 4,7 of Section 2 are based on the following extremely important theorem
(see Rockafeller [1970]).
Separation theorem for convex sets. Let F, G be convex subsets of Rn such that the relative interiors
of F, G are disjoint. Then there exists λ ∈ Rn , λ 6= 0, and θ ∈ R such that
λ0 g ≤ θ for all g ∈ G
λ0 f ≥ θ for all f ∈ F .

Proof of Lemma 4: Since M is stable at b̂ there exists K such that

M (b) − M (b̂) ≤ K|b − b̂| for all b ∈ B . (5.47)

In R1+m consider the sets

F = {(r, b)|b ∈ Rm , r > K|b − b̂|} ,
G = {(r, b)|b ∈ B, r ≤ M (b) − M (b̂)} .
It is easy to check that F, G are convex, and (5.47) implies that F ∩ G = φ. Hence, there exist
(λ0 , . . . , λm ) 6= 0, and θ such that
X
m
λ0 r + λi bi ≤ θ for (r, b) ∈ G ,
i=1 (5.48)
Xm
λ0 r + λi bi ≥ θ for (r, b) ∈ F .
i=1

From the definition of F , and the fact that (λ0 , . . . , λm ) 6= 0, it can be verified that (5.49) can hold
X m Xm
only if λ0 > 0. Also from (5.49) we can see that λi b̂i ≥ θ, whereas from (5.48) λi b̂i ≤ θ,
i=1 i=1
X
m
so that λi b̂i = θ. But then from (5.48) we get
i=1

X
m X
m
λi
1
M (b) − M (b̂) ≤ λ0 [θ − λ i bi ] = (− )(bi − b̂). ♦
λ0
i=1 i=1

Proof of Lemma 7: Since b̂ is in the interior of B, there exists ε > 0 such that

b ∈ B whenever |b − b̂| < ε . (5.49)

In R1+m consider the sets

F = {(r, b̂)|r > M (b̂}
G = {(r, b)|b ∈ B, r ≤ M (b)} .
Evidently, F, G are convex and F ∩ G = φ, so that there exist (λ0 , . . . , λm ) 6= 0, and θ such that
X
m
λ0 r + λi b̂i ≥ θ , for r > M (b̂) , (5.50)
i=1
74 CHAPTER 5. NONLINEAR PROGRAMMING

X
m
λ0 r + λi b̂i ≤ θ , for (r, b) ∈ G . (5.51)
i=1

From (5.49), and the fact that (λ0 , . . . , λm ) 6= 0 we can see that (5.50) and (5.51) imply λ0 > 0.
From (5.50),(5.51) we get
X
m
λ0 M (b̂) + λi b̂i = θ ,
i=1

so that (5.52) implies

X
m
λi
M (b) ≤ (b̂) + (− )(bi − b̂i ) . ♦
λ0
i=1
Chapter 6

SEQUENTIAL DECISION PROBLEMS:

DISCRETE-TIME OPTIMAL
CONTROL

In this chapter we apply the results of the last two chapters to situations where decisions have to be
made sequentially over time. A very important class of problems where such situations arise is in
the control of dynamical systems. In the first section we give two examples, and in Section 2 we
derive the main result.

6.1 Examples

The trajectory of a vertical sounding rocket is controlled by adjusting the rate of fuel ejection which
generates the thrust force. Specifically suppose that the equations of motion are given by (6.1).

ẋ1 (t) = x2 (t)

ẋ2 (t) = − xC3 D 2
(t) ρ(x1 (t))x2 (t) − g +
CT
x3 (t) u(t) (6.1)
ẋ3 (t) = −u(t) ,

where x1 (t) is the height of the rocket from the ground at time t, x2 (t) is the (vertical) speed at
time t, x3 (t) is the weight of the rocket (= weight of remaining fuel) at time t. The “dot” denotes
differentiation with respect to t. These equations can be derived from the force equations under the
assumption that there are four forces acting on the rocket, namely: inertia = x3 ẍ1 = x3 ẋ2 ; drag
force = CD ρ(x1 )x22 where CD is constant, ρ(x1 ) is a friction coefficient depending on atmospheric
density which is a function of x1 ; gravitational force = gx3 with g assumed constant; and thrust
force CT ẋ3 , assumed proportional to rate of fuel ejection. See Figure 6.1. The decision variable at
time t is u(t), the rate of fuel ejection. At time 0 we assume that (x1 (0), x2 (0), x3 (0)) = (0, 0, M );
that is, the rocket is on the ground, at rest, with initial fuel of weight M . At a prescribed final time
tf , it is desired that the rocket be at a position as high above the ground as possible. Thus, the

75
76 CHAPTER 6. DISCRETE-TIME OPTIMAL CONTROL

decision problem can be formalized as (6.2).

Maximize x1 (tf )
subject to ẋ(t) = f (x(t), u(t)), 0 ≤ t ≤ tf
(6.2)
x(0) = (0, 0, M )
u(t) ≥ 0, x3 (t) ≥ 0, 0 ≤ t ≤ tf ,

where x = (x1 , x2 , x3 )0 , f : R3+1 → R3 is the right-hand side of (6.1). The constraint inequalities
u(t) ≥ 0 and x3 (t) ≥ 0 are obvious physical constraints.

x3 ẍ1 = inertia

CD ϕ(x1 )x22 = drag

gx3 = gravitational force

CR ẋ3 = thrust

Figure 6.1: Forces acting on the rocket.

The decision problem (6.2) differs from those considered so far in that the decision variables,
which are functions u : [0, tf ] → R, cannot be represented as vectors in a finite-dimensional
space. We shall treat such problems in great generality in the succeeding chapters. For the moment
we assume that for computational or practical reasons it is necessary to approximate or restrict
the permissible function u(·) to be constant over the intervals [0, t1 ), [t1 , t2 ), . . . , [tN −1 , tf ), where
t1 , t2 , . . . , tN −1 are fixed a priori. But then if we let u(i) be the constant value of u(·) over [ti , ti+1 ),
we can reformulate (6.2) as (6.3):
Maximize x1 (tN )(tN = tf )
subject to x(ti+1 ) = g(i, x(ti ), u(i)), i = 0, 1, . . . , N − 1
(6.3)
x(t0 ) = x(0) = (0, 0, M )
u(i) ≥ 0, x3 (ti ) ≥ 0, i = 0, 1, . . . , N .

In (6.3) g(i, x(t1 ), u(i)) is the state of the rocket at time ti+1 when it is in state x(ti ) at time ti and
u(t) ≡ u(i) for ti ≤ t < ti+1 .
As another example consider a simple inventory problem where time enters discretely in a natural
fashion. The Squeezme Toothpaste Company wants to plan its production and inventory schedule
for the coming month. It is assumed that the demand on the ith day, 0 ≤ i ≤ 30, is d1 (i) for
6.2. MAIN RESULT 77

their orange brand and d2 (i) for their green brand. To meet unexpected demand it is necessary that
the inventory stock of either brand should not fall below s > 0. If we let s(i) = (s1 (i), s2 (i))0
denote the stock at the beginning of the ith day, and m(i) = (m1 (i), m2 (i))0 denote the amounts
manufactured on the ith day, then clearly

s(i + 1) + s(i) + m(i) − d(i) ,

where d(i) = (d1 (i), d2 (i))0 . Suppose that the initial stock is ŝ, and the cost of storing inventory s
for one day is c(s) whereas the cost of manufacturing amount m is b(m). The the cost-minimization
decision problem can be formalized as (6.4):

30
X
Maximize (c(s(i)) + b(m(i)))
i=0
subject to s(i + 1) = s(i) + m(i) − d(i), 0 ≤ i ≤ 29 (6.4)
s(0) = ŝ
s(i) ≥ (s, s)0 , m(i) ≥ 0, 0 ≤ i ≤ 30 .

Before we formulate the general problem let us note that (6.3) and (6.4) are in the form of non-
linear programming problems. The reason for treating these problems separately is because of their
practical importance, and because the conditions of optimality take on a special form.

6.2 Main Result

The general problem we consider is of the form (6.5).

X
N −1
Maximize f0 (i, x(i), u(i))
i=0
subject to
dynamics : x(i + 1) − x(i) = f (i, x(i), u(i)), i = 0, . . . , N − 1 , (6.5)
initial condition: q0 (x(0) ≤ 0, g0 (x(0)) = 0 ,
final condition: qN (x(N )) ≤ 0, gN (x(N )) = 0 ,
state-space constraint: qi (x(i)) ≤ 0, i = 1, . . . , N − 1 ,
control constraint: hi (u(i)) ≤ 0, i = 0, . . . , N − 1 .

Here x(i) ∈ Rn , u(i) ∈ Rp , f0 (i, ·, ·) : Rn+p → R, f (i, ·, ·) : Rn+p → Rn , qi : Rn →

Rmi , gi : Rn → R`i , hi : Rp → Rsi are given differentiable functions. We follow the control
theory terminology, and refer to x(i) as the state of the system at time i, and u(i) as the control or
input at time i.
We use the formulation mentioned in the Remark following Theorem 3 of V.1.2, and construct
the Lagrangian function L by

L(x(0), . . . , x(N ); u(0), . . . , u(N − 1); p(1), . . . , p(N );

λ0 , . . . , λN ; α0 , αN ; γ 0 , . . . , γ N −1 )
78 CHAPTER 6. DISCRETE-TIME OPTIMAL CONTROL

−1
(N −1
X
N X
= f0 (i, x(i), u(i)) − (p(i + 1))0 (x(i + 1) − x(i) − f (i, x(i), u(i)))+
i=0 i=0
−1
)
X
N X
N
i 0 0 0 N 0 i 0
(λ ) qi (x(i)) + (α ) g0 (x(0)) + (α ) gN (x(N )) + (γ ) hi (u(i)) .
i=0 i=0

Suppose that CQ is satisfied for (6.5), and x∗ (0), . . . , x∗ (N ); u∗ (0), . . . , u∗ (N − 1), is an optimal
solution. Then by Theorem 2 of 5.1.2, there exist p∗ (i) in Rn for 1 ≤ i ≤ N, λi∗ ≥ 0 in Rmi for
0 ≤ i ≤ N, αi∗ in R`i for i = 0, N, and γ i∗ ≥ 0 in Rsi for 0 ≤ i ≤ N − 1, such that
(A) the derivative of L evaluated at these points vanishes,
and
(B) λi∗ qi (x∗ (i)) = 0 for 0 ≤ i ≤ N , γ i∗ hi (u∗ (i)) = 0 for 0 ≤ i ≤ N − 1 .
We explore condition (A) by taking various partial derivatives.
Differentiating L with respect to x(0) gives

f0x (0, x∗ (0), u∗ (0)) − {−(p∗ (1))0 − (p∗ (1))0 [fx (0, x∗ (0), u∗ (0))]
+(λ0∗ )0 [q0x (x∗ (0))] + (α0∗ )0 [g0x (x∗ (0))]} = 0 ,
or

p∗ (0) − p∗ (1) = [fx (0, x∗ (0), u∗ (x))]0 p∗ (1)

(6.6)
+[f0x (0, x∗ (0), u∗ (0))]0 − [q0x (x∗ (0))]0 λ0∗ ,

where we have defined

p∗ (0) = [g0x (x∗ (x))]0 α0∗ . (6.7)

Differentiating L with respect to x(i), 1 ≤ i ≤ N − 1, and re-arranging terms gives

p∗ (i) − p∗ (i + 1) = [fx (i, x∗ (i), u∗ (i))]0 p∗ (i + 1)

(6.8)
+[f0x (i, x∗ (i), u∗ (i))]0 − [qix (x∗ (i))]0 λi∗ .

Differentiating L with respect to x(N ) gives,

p∗ (N ) = −[gN x (x∗ (N ))]0 αN∗ − [qN x (x∗ (N ))]0 λN∗ .
It is convenient to replace αN∗ by −αN∗ so that the equation above becomes (6.9)

p∗ (N ) = [gN x (x∗ (N ))]0 αN∗ − [qN x (x∗ (N ))]0 λN∗ . (6.9)

Differentiating L with respect to u(i), 0 ≤ i ≤ N − 1 gives

[f0u (i, x∗ (i), u∗ (i))]0 + [fu (i, x∗ (i), u∗ (i))]0 p∗ (i + l) − [hiu (u∗ (i))]0 γ i∗ = 0 . (6.10)

We summarize our results in a convenient form in

Table 6.1

Remark 1: Considerable elegance and mnemonic simplification is achieved if we define the

Hamiltonian function H by
 6.2. MAIN RESULT
Suppose x∗ (0), . . . , x∗ (N ); then there exist p∗ (N ); λ0∗ , . . . , λN∗ ; α0∗ , αN∗ ;
u∗ (0), . . . , u∗ (N − 1) maximizes γ 0∗ , . . . , γ N −1∗ , such that
X
N −1
f0 (i, x(i), u(i)) subject
i=0
to the constraints below
dynamics: i = 0, . . . , N − 1 adjoint equations: i = 0, . . . , N − 1
x(i + 1) − x(i) = f (i, x(i), u(i)) p∗ (i) − p∗ (i + 1) = [fx (i, x∗ (i), u∗ (i)]0 p∗ (i + 1)
+[f0x (i, x∗ (i), u∗ (i)]0 − [qix (x∗ (i)]0 γ i∗
Table 6.1:

initial condition: transversality conditions: λ0∗ ≥ 0,

q0 (x∗ (0)) ≤ 0, g0 (x∗ (0)) = 0 p∗ (0) = [g0x (x∗ (0))]0 α0∗ (λ0∗ )0 q0 (x∗ (0)) = 0
λN∗ ≥ 0,
final conditions:
qN (x∗ (N )) ≤ 0, gN (x∗ (N )) = 0 p∗ (N ) = [gN x (x∗ (N ))]0 αN∗ − [qN x (x∗ (N ))]0 λN∗ (λN∗ )0 qN (x∗ (N )) = 0
state space constraint:
i = 1, . . . , N − 1 λi∗ ≥ 0,
qi (x∗ (i)) ≤ 0 (λi∗ )0 qi (x∗ (i)) = 0

control constraint:
i = 0, . . . , N − 1 [f0u (i, x∗ (i), u∗ (i))]0 + [fu (i, x∗ (i)u∗ (i))]0 . γ i∗ ≥ 0
0
hi (u∗ (i)) ≤ 0 p∗ (i1 ) = [hiu (u∗ (i))]0 γ i∗ (γ i∗ ) hi (u∗ (i) = 0

79
80 CHAPTER 6. DISCRETE-TIME OPTIMAL CONTROL

H(i, x, u, p) = f0 (i, x, u) + p0 f (i, x, u) .

The dynamic equations then become

x∗ (i + 1) − x∗ (i) = [Hp (i, x∗ (i), u∗ (i), p∗ (i + 1))]0 ,

(6.11)
0≤i≤N −1.

and the adjoint equations (6.6) and (6.8) become

p∗ (i) − p∗ (i + 1) = [Hx (i, x∗ (i), u∗ (i), u∗ (i), p∗ (i + 1))]0 − [qix (x∗ (i))]0 λi∗ ,
0≤i≤N −1 ,

whereas (6.10) becomes

[hiu (u∗ (i))]0 γ i∗ = [Hu (i, x∗ (i), u∗ (i), p∗ (i + 1))]0 , 0 ≤ i ≤ N − 1 . (6.12)

Remark 2: If we linearize the dynamic equations about the optimal solution we obtain

δx(i + 1) − δx(i) = [fx (i, x∗ (i), u∗ (i))]δx(i) + [fu (i, x∗ (i, x∗ , (i), u∗ (i))]δu(i) ,

whose homogeneous part is

z(i + 1) − z(i) = [fx (i, x∗ (i), u∗ (i))]z(i) ,

which has for it adjoint the system

r(i) − r(i + 1) = [fx (i, x∗ (i), u∗ (i))]0 r(i + 1) . (6.13)

Since the homogeneous part of the linear difference equations (6.6), (6.8) is (6.13), we call (6.6),
(6.8) the adjoint equations, and the p∗ (i) are called adjoint variables.
Remark 3: If the f0 (i, ·, ·) are concave and the remaining function in (6.5) are linear, then CQ is
satisfied, and the necessary conditions of Table 6.1 are also sufficient. Furthermore, in this case we
see from (6.13) that u∗ (i) is an optimal solution of

Maximize H(i, x∗ (i), u, p∗ (i + 1)),

subject to hi (u) ≤ 0 .

For this reason the result is sometimes called the maximum principle.
Remark 4: The conditions (6.7), (6.9) are called transversality conditions for the following reason.
Suppose q0 ≡ 0, qN ≡ 0, so that the initial and final conditions read g0 (x(0)) = 0, gN (x(N )) = 0,
which describe surfaces in Rn . Conditions (6.7), (6.9) become respectively p∗ (0) = [g0x (x∗ (0))]0 α0∗ , p∗ (N ) =
[gN x (x(N ))]0 αN∗ which means that p∗ (0) and p∗ (N ) are respectively orthogonal or transversal to
the initial and final surfaces. Furthermore, we note that in this case the initial and final conditions
specify (`0 + `n ) conditions whereas the transversality conditions specify (n − `0 ) + (n − `n ) condi-
tions. Thus, we have a total of 2n boundary conditions for the 2n-dimensional system of difference
equations (6.5), (6.12); but note that these 2n boundary conditions are mixed, i.e., some of them
refer to the initial time 0 and the rest refer to the final time.
6.2. MAIN RESULT 81

Exercise 1: For the regulator problem,

X −1 N −1
1X
N
Maximize 1
2 x(i)0 Qx(i) + u(i)0 P u(i)
2
i=0 i=0
subject to x(i + 1) − x(i) = Ax(i) + Bu(i), 0 ≤ i ≤ N − 1
x(0) = x̂(0),
u(i) ∈ Rp , 0 ≤ i ≤ N − 1 ,

where x(i) ∈ Rn , A and B are constant matrices, x̂(0) is fixed, Q = Q0 is positive semi-definite,
and P = P 0 is positive definite, show that the optimal solution is unique and can be obtained by
solving a 2n-dimensional linear difference equation with mixed boundary conditions.

Exercise 2: Show that the minimal fuel problem,

 
X
N −1 XP
Minimize  |(u(i))j | ,
i=0 j=1
subject to x(i + 1) − x(i) = Ax(i) + Bu(i), 0 ≤ i ≤ N − 1
x(0) = x̂(0), x(N ) = x̂(N ) ,
u(i) ∈ Rp , |u(i))j | ≤ 1, 1 ≤ j ≤ p, 0 ≤ i ≤ N − 1

can be transformed into a linear programming problem. Here x̂(0), x̂(N ) are fixed, A and B are as
in Exercise 1.
82 CHAPTER 6. DISCRETE-TIME OPTIMAL CONTROL
Chapter 7

SEQUENTIAL DECISION PROBLEMS:

CONTINUOUS-TIME OPTIMAL
CONTROL OF LINEAR SYSTEMS

We will investigate decision problems similar to those studied in the last chapter with one (math-
ematically) crucial difference. A choice of control has to be made at each instant of time t where
t varies continuously over a finite interval. The evolution in time of the state of the systems to be
controlled is governed by a differential equation of the form:

ẋ(t) = f (t, x(t), u(t)) ,

where x(t) ∈ Rn and u(t) ∈ Rp are respectively the state and control of the system at time t.
To understand the main ideas and techniques of analysis it will prove profitable to study the linear
case first. The general nonlinear case is deferred to the next chapter. In Section 1 we present the
general linear problem and study the case where the initial and final conditions are particularly
simple. In Section 2 we study more general boundary conditions.

7.1 The Linear Optimal Control Problem

We consider a dynamical system governed by the linear differential equation (7.1):

ẋ(t) = A(t)x(t) + B(t)u(t), t ≥ t0 . (7.1)

Here A(·) and B(·) are n × n- and n × p-matrix valued functions of time; we assume that they are
piecewise continuous functions. The control u(·) is constrained to take values in a fixed set Ω ⊂ Rp ,
and to be piecewise continuous.
Definition: A piecewise continuous function u : [t0 , ∞) → Ω will be called an admissible control.
U denotes the set of all admissible controls.
Let c ∈ Rn , x0 ∈ Rn be fixed and let tf ≥ t0 be a fixed time. We are concerned with the

83
84 CHAPTER 7. CONTINUOUS-TIME LINEAR OPTIMAL CONTROL

decision problem (7.2).

Maximize c0 x(tf ),
subject to
dynamics: ẋ(t) = A(t)x(t) + B(t)u(t) , t0 ≤ t ≤ tf ,
(7.2)
initial condition: x(t0 ) = x0 ,
final condition: x(tf ) ∈ Rn ,
control constraint: u(·) ∈ U .
Definition: (i) For any piecewise continuous function u(·) : [t0 , tf ] → Rp , for any z ∈ Rn , and
any t0 ≤ t1 ≤ t2 ≤ tf let
φ(t2 , t1 , z, u)
denote the state of (7.1) at time t2 , if a time t1 it is in state z, and the control u(·) is applied.
(ii) Let
K(t2 , t1 , z) = {φ(t2 , t1 , z, u)|u ∈ U} .
Thus, K(t2 , t1 , z) is the set of states reachable at time t2 starting at time t1 in state z and using
admissible controls. We call K the reachable set.
Definition: Let Φ(t, τ ), t0 ≤ τ ≤ t ≤ tf , be the transition-matrix function of the homogeneous
part of (7.1), i.e., Φ satisfies the differential equation

∂t (t, τ ) = A(t)Φ(t, τ ) ,
∂Φ

and the boundary condition

Φ(t, t) ≡ In .
The next result is well-known. (See Desoer
Z [1970].)
t2
Lemma 1: φ(t2 , t1 , z, u) = Φ(t2 , t1 )z + Φ(t2 , τ )B(τ )u(τ )dτ .
t1

Exercise 1: (i) Assuming that Ω is convex, show that U is a convex set. (ii) Assuming that U is
convex show that K(t2 , t1 , z) is a convex set. (It is a deep result that K(t2 , t1 , z) is convex even if
Ω is not convex (see Neustadt [1963]), provided we include in U any measurable function
u : [t0 , ∞) → Ω.)

Definition: Let K ⊂ Rn , and let x∗ ∈ K. We say that c is the outward normal to a hyperplane
supporting K at x∗ if c 6= 0, and
c0 x∗ ≥ c0 x for all x ∈ K .
The next result gives a geometric characterization of the optimal solutions of (2).
Lemma 2: Suppose c 6= 0. Let u∗ (·) ∈ U and let x∗ (t) = φ(t, t0 , x0 , u∗ ). Then u∗ is an optimal
solution of (2) iff
(i) x∗ (tf ) is on the boundary of K = K(tf , t0 , x0 ), and
(ii) c is the outward normal to a hyperplane supporting K at x∗ . (See Figure 7.1.)

Proof: Clearly (i) is implied by (ii) because if x∗ (tf ) is in the interior of K there is δ > 0 such
that (x∗ (tf ) + δc) ∈ K; but then
7.1. THE LINEAR OPTIMAL CONTROL PROBLEM 85

x3
c

x∗ (tf )

c x2

K
π ∗ = {x|c0 x = c0 x∗ (tf )}

x1

Figure 7.1: c is the outward normal to π ∗ supporting K at x∗ (tf )

.

c0 (x∗ (tf ) + δc) = c0 x∗ (tf ) + δ|c|2 > c0 x∗ (tf ) .

Finally, from the definition of K it follows immediately that u∗ is optimal iff c0 x∗ (tf ) ≥ c0 x for all
x∈K. ♦
The result above characterizes the optimal control u∗ in terms of the final state x∗ (tf ). The beauty
and utility of the theory lies in the following result which translates this characterization directly in
terms of u∗ .
Theorem 1: Let u∗ (·) ∈ U and let x∗ (t) = φ(t, t0 , x0 , u∗ ), t0 ≤ t ≤ tf . Let p∗ (t) be the solution
of (7.3) and (7.4):
adjoint equation: ṗ∗ (t) = −A0 (t)p∗ (t) , t0 ≤ t ≤ tf . (7.3)

final condition: p∗ (tf ) = c . (7.4)

Then u∗ (·) is optimal iff
(p∗ (t))0 B(t)u∗ (t) = sup{(p∗ (t))0 B(t)v|v ∈ Ω} , (7.5)
for all t ∈ [t0 , tf ], except possibly for a finite set.

Proof: u∗ (·) is optimal iff for every u(·) ∈ U

Rt
(p∗ (tf ))0 [Φ(tf , t0 )x0 + t0f Φ(tf , τ )B(τ )u∗ (τ )dτ ]
Rt
≥ (p∗ (tf ))0 [Φ(tf , t0 )x0 + t0f Φ(tf , τ )B(τ )u(τ )dτ ] ,
which is equivalent to (7.6).
R tf ∗ 0 ∗
t0R (p (tf )) Φ(tf , τ )B(τ )u (τ )dτ (7.6)
≥ t0f (p∗ (tf ))0 Φ(tf , τ )B(τ )u(τ )dτ
t
86 CHAPTER 7. CONTINUOUS-TIME LINEAR OPTIMAL CONTROL

Now by properties of the adjoint equation we know that p∗ (t))0 = (p∗ (tf ))0 Φ(tf , t) so that (7.6) is
equivalent to (7.7),
R tf ∗ 0 ∗
R tf ∗ 0
t0 (p (τ )) B(τ )u (τ )dτ ≥ t0 (p (τ )) B(τ )u(τ )dτ, (7.7)

and the sufficiency of (7.5) is immediate.

To prove the necessity let D be the finite set of points where the function B(·) or u∗ (·) is discon-
tinuous. We shall show that if u∗ (·) is optimal then (7.5) is satisfied for t 6∈ D. Indeed if this is not
the case, then there exists t∗ ∈ [t0 , tf ], t∗ 6∈ D, and v ∈ Ω such that
(p∗ (t∗ ))0 B(t∗ )u∗ (t∗ ) < (p∗ (t∗ ))0 B(t∗ )v ,
and since t∗ is a point of continuity of B(·) and u∗ (·), it follows that there exists δ > 0 such that

(p∗ (t))0 B(t)u∗ (t) < (p∗ (t))0 B(t)v, for |t − t∗ | < δ . (7.8)

Define ũ(·) ∈ U by

v |t − t∗ | < δ, t ∈ [t0 , tf ]
ũ(t) =
u∗ (t) otherwise .

Then (7.8) implies that

R tf R tf
t0 (p∗ (t))0 B(t)ũ(t)dt > t0 (p∗ (t))0 B(t)u∗ (t)dt .
But then from (7.7) we see that u∗ (·) cannot be optimal, giving a contradiction. ♦

Corollary 1: For t0 ≤ t1 ≤ t2 ≤ tf ,

(p∗ (t2 ))x∗ (t2 ) ≥ (p∗ (t2 ))0 x for all x ∈ K(t2 , t1 , x∗ (t1 )). (7.9)

Exercise 2: Prove Corollary 1.

Remark 1: The geometric meaning of (7.9) is the following. Taking t1 = t0 in (7.9), we see that if
u∗ (·) is optimal, i.e., if c = p∗ (tf ) is the outward normal to a hyperplane supporting K(tf , t0 , x0 )
at x∗ (tf ), then x∗ (t) is on the boundary of K(t, t0 , x0 ) and p∗ (t) is the normal to a hyperplane
supporting K(t, t0 , x0 ) at x∗ (t). This normal is obtained by transporting backwards in time, via
the adjoint differential equation, the outward normal p∗ (tf ) at time tf . The situation is illustrated
in Figure 7.2.
Remark 2: If we define the Hamiltonian function H by

H(t, x, u, p) = p0 (A(t)x + B(t)u) ,

and we define M by
M (t, x, p) = sup{H(t, x, u, p)|u ∈ Ω},
then (7.5) can be rewritten as

H(t, x∗ (t), u∗ (t), p∗ (t)) = M (t, x∗ (t), p∗ (t)) . (7.10)

This condition is known as the maximum principle.

7.2. MORE GENERAL BOUNDARY CONDITIONS 87

Exercise 3: (i) Show that m(t) = M (t, x∗ (t), p∗ (t)) is a Lipschitz function of t. (ii) If A(t), B(t)
are constant, show that m(t) is constant. (Hint: Show that (dm/dt) ≡ 0.)

The next two exercises show how we can obtain important qualitative properties of an optimal
control.

Exercise 4: Suppose that Ω is bounded and closed. Show that there exists an optimal control u∗ (·)
such that u∗ (t) belongs to the boundary of Ω for all t.
Exercise 5: Suppose Ω = [α, β], so that B(t) is an n × 1 matrix. Suppose that A(t) ≡ A and
B(t) ≡ B are constant matrices and A has n real eigenvalues. Show that there is an optimal
control u∗ (·) and t0 ≤ t1 ≤ t2 ≤ . . . ≤ tn ≤ tf such that u∗ (t) ≡ α or β on [ti , ti+1 ), 0 ≤ i ≤ n.
(Hint: first show that (p∗ (t))0 B = γ1 exp(δ1 t) + . . . + γn exp(δn (t)) for some γi , δi in R.)
Exercise 6: Assume that K(tf , t0 , x0 ) is convex (see remark in Exercise 1 above). Let
f0 : Rn → R be a differentiable function and suppose that the objective function in (7.2) is
f0 (x(tf )) instead of c0 x(tf ). Suppose u∗ (·) is an optimal control. Show that u∗ (·) satisfies the
maximum principle (7.10) where p∗ (·) is the solution of the adjoint equation (7.3) with the final
condition

p∗ (tf ) = 5f0 (x∗ (tf )) .

Also show that this condition is sufficient for optimality if f0 is concave. (Hint: Use Lemma 1 of
5.1.1 to show that if u∗ (·) is optimal, then f0x (x∗ (tf )(x∗ (tf ) − x) ≤ for all x ∈ K(tf , t0 , x0 ).)

7.2 More General Boundary Conditions

We consider the following generalization of (7.2). The notion of the previous section is retained.

Maximize c0 x(tf )
subject to
dynamics: ẋ(t) = A(t)x(t) + B(t)u(t), t0 ≤ t ≤ tf ,
initial condition: G0 x(t0 ) = b0 , (7.11)
final condition: Gf x(tf ) = bf ,
control constraint: u(·) ∈ U , i.e., u : [t0 , t{ ] → ⊗ and
u(·)piecewise continuous.

In (7.11) G0 and Gf are fixed matrices of dimensions `0 xn and `f × n respectively, while b0 ∈

R`0 , bf ∈ R`f are fixed vectors.
We will analyze the problem in the same way as before. That is, we first characterize optimality
in terms of the state at the final time, and then translate these conditions in terms of the control. For
convenience let

T 0 = {z ∈ Rn |G0 z = b0 } ,
T f = {z ∈ Rn |Gf z = bf } .

Definition: Let p ∈ Rn . Let z ∗ ∈ T 0 . We say that p is orthogonal to T 0 at z ∗ and we write

p ⊥ T 0 (z ∗ ) if
 88

Rn Rn Rn Rn

p∗ (t2 )
K(tf , t0 , x0 )
p∗ (t 1) x∗ (t2 ) p∗ (tf ) = c
x0 = x∗ (t 0) = K(t0 , t0 , x0 ) x∗ (tf )

x∗ (t1 ) K(t2 , t0 , x0 )

K(t1 , t0 , x0 )

Figure 7.2: Illustration of (7.9) for t1 = t0 .

t

t0 t1 t2 tf
CHAPTER 7. CONTINUOUS-TIME LINEAR OPTIMAL CONTROL
7.2. MORE GENERAL BOUNDARY CONDITIONS 89

p0 (z − z ∗ ) = 0 for all z ∈ T 0 .
Similarly if z ∗ ∈ T f , p ⊥ T f (z ∗ ) if
p0 (z − z ∗ ) = 0 for all z ∈ T f .
Definition: Let X(tf ) = {Φ(tf , t0 )z + w|z ∈ T 0 , w ∈ K(tf , t0 , 0)}.
Exercise 1: X(tf ) = {Φ(tf , t0 , z, u)|z ∈ T 0 , u(·) ∈ U}.
Lemma 1: Let x∗ (t0 ) ∈ T 0 and u∗ (·) ∈ U . Let x∗ (t) = φ(t, t0 , x∗ (t0 ), u∗ ), and suppose that
x∗ (tf ) ∈ T f .
(i) Suppose the Ω is convex. If u∗ (·) is optimal, there exist p̂0 ∈ R, p̂0 ≥ 0 and p̂ ∈ Rn , not both
zero, such that
(p̂0 c + p̂)0 x∗ (tf ) ≥ (p̂0 c + p̂)0 x for all x ∈ X(tf ) , (7.12)

p̂ ⊥ T f (x∗ (tf )) , (7.13)

[Φ(tf , t0 )]0 (p̂0 c + p̂) ⊥ T 0 (x∗ (t0 )) . (7.14)

(ii) Conversely if there exist p̂0 > 0, and p̂ such that (7.12) and (7.13) are satisfied, then u∗ (·) is
optimal and (7.14) is also satisfied.
Proof: Clearly u∗ (·) is optimal iff
c0 x∗ (tf ) ≥ c0 x for all x ∈ X(tf ) ∩ T f . (7.15)
(i) Suppose that u∗ (·) is optimal. In R1+m define sets S 1 , S 2 by
S 1 = {(r, x)|r > c0 x∗ (tf ), x ∈ T f } , (7.16)

S 2 = {(r, x)|r = c0 x , x ∈ X(tf )} . (7.17)

First of all S 1 ∩ S 2 = φ because otherwise there exists x ∈ X(tf ) ∩ T f such that c0 x > c0 x∗ (tf )
contradicting optimality of u∗ (·) by (7.15).
Secondly, S 1 is convex since T f is convex. Since Ω is convex by hypothesis it follows by Exercise
1 of Section 1 that S 2 is convex.
But then by the separation theorem for convex sets (see 5.5) there exists p̂0 ∈ R, p̂ ∈ Rn , not
both zero, such that
p̂0 r 1 + p̂0 x1 ≥ p̂0 r 2 + p̂0 x2 for all (r i , xi ) ∈ S i , i = 1, 2. (7.18)
In particular (7.18) implies that
p̂0 r + p̂0 x∗ (tf ) ≥ p̂0 c0 x + p̂0 x for all x ∈ X(tf ), r > c0 x∗ (tf ). (7.19)
Letting r → ∞ we conclude that (7.19) can hold only if p̂0 ≥ 0. On the other hand letting r →
c0 x∗ (tf ) we see that (7.19) can hold only if
p̂0 c0 x∗ (tf ) + p̂0 x∗ (tf ) ≥ p̂0 c0 x + p̂0 x for all x ∈ X(tf ) , (7.20)
which is the same as (7.12). Also from (7.18) we get
90 CHAPTER 7. CONTINUOUS-TIME LINEAR OPTIMAL CONTROL

p̂0 r + p̂0x ≥ p̂0 c0 x∗ (tf ) + p̂0 x∗ (tf ) for all r > c0 x∗ (tf ), x ∈ T f ,

which can hold only if

p̂1 c0 x∗ (tf ) + p̂0 x ≥ p̂0 c0 x∗ (tf ) + p̂0 x∗ (tf ) for all x ∈ T f ,

or

p̂0 (x − x∗ (tf )) ≥ 0 for all x ∈ T f (7.21)

But {x − x∗ (tf )|x ∈ T f } = {z|Gf z = 0} is a subspace of Rn , so that (7.21) can hold only if

p̂0 (x − x∗ (tf )) = 0 for all x ∈ T f ,

which is the same as (7.13). Finally (7.12) always implies (7.14), because by the definition of X(tf )
and Exercise 1, {Φ(tf , t0 )(z − x∗ (t0 )) + x∗ (tf )} ∈ X(tf ) for all z ∈ T 0 , so that from (7.12) we
get

0 ≥ (p̂0 c + p̂)0 Φ(tf , t0 )(z − x∗ (t0 )) for all z ∈ T 0 ,

which can hold only if (7.14) holds.

(ii) Now suppose that p̂0 > 0 and p̂ are such that (7.12), (7.13) are satisfied. Let x̃ ∈ X(tf ) ∩ T f .
Then from (7.13) we conclude that

p̂0 x∗ (tf ) = p̂0 x̃ ,

so that from (7.12) we get

p̂0 c0 x∗ (tf ) ≥ p̂0 c0 x̃ ;

but then by (7.15) u∗ (·) is optimal. ♦

Remark 1: If it is possible to choose p̂0 > 0 then p̂0 = 1, p̂ = (p̂/p̂0 ) will also satisfy (7.12),
(7.13), and (7.14). In particular, in part (ii) of the Lemma we may assume p̂0 = 1.
Remark 2: it would be natural to conjecture that in part (i) p̂0 may be chosen > 0. But in Figure
7.3 below, we illustrate a 2-dimensional situation where T 0 = {x0 }, T f is the vertical line, and
T f ∩ X(tf ) consists of just one vector. It follows that the control u∗ (·) ∈ U for which
x∗ (tf ) = φ(tf , t0 , x0 , u∗ ) ∈ T f is optimal for any c. Clearly then for some c (in particular for the
c in Figure 7.3) we are forced to set p̂0 = 0. In higher dimensions the reasons may be more
complicated, but basically if T f is “tangent” to X(tf ) we may be forced to set p̂0 = 0 (see
Exercise 2 below). Finally, we note that part (i) is not too useful if p̂0 = 0, since then (7.12), (7.13),
and (7.14) hold for any vector c whatsoever. Intuitively p̂0 = 0 means that it is so difficult to satisfy
the initial and final boundary conditions in (7.11) that optimization becomes a secondary matter.
Remark 3: In (i) the convexity of Ω is only used to guarantee that K(tf , t0 , 0) is convex. But it is
known that K(tf , t0 , 0) is convex even if Ω is not (see Neustadt [1963]).
Exercise 2: Suppose there exists z in the interior of X(tf ) such that z ∈ T f . Then in part (i) we
must have p̂0 > 0.

We now translate the conditions obtained in Lemma 1 in terms of the control u∗ .

7.2. MORE GENERAL BOUNDARY CONDITIONS 91

Theorem 1: Let x∗ (t0 ) ∈ T 0 and u∗ (·) ∈ U . Let x∗ (t) = φ(t, t0 , x∗ (t0 ), u∗ ) and suppose that
x∗ (tf ) ∈ T f .
(i) Suppose that Ω is convex. If u∗ (·) is optimal for (7.11), then there exist a number p∗0 ≥ 0, and a
function p∗ : [t0 , tf ] → Rn , not both identically zero, satisfying

adjoint equation: ṗ∗ (t) = −A0 (t)p∗ (t) , t0 ≤ t ≤ tf (7.22)

initial condition: p∗ (t0 )⊥T 0 (x∗ (t0 )) (7.23)

final condition: (p∗ (tf ) − p∗0 c)⊥T f (x∗ (tf )) , (7.24)

and the maximum principle

H(t, x∗ (t), u∗ (t), p∗ (t)) = M (t, x∗ (t), p∗ (t)) , (7.25)

holds for all t ∈ [t0 , tf ] except possibly for a finite set.

(ii) Conversely suppose there exist p∗0 > 0 and p∗ (·) satisfying (7.22), (7.23), (7.24), and (7.25).
Then u∗ (·) is optimal.

[Here

H(t, x, u, p) = p0 (A(t)x + B(t)u), M (t, x, p) = sup{H(t, x, v, p)|v ∈ Ω}.]

Proof: A repetition of a part of the argument in the proof of Theorem 1 of Section 1 show that if p∗
satisfies (7.22), then (7.25) is equivalent to (7.26):

(p∗ (tf ))0 x∗ (tf ) ≥ (p∗ (tf ))0 x for all x ∈ K(tf , t0 , x∗ (t0 )) . (7.26)

(i) Suppose u∗ (·) is optimal and Ω is convex. Then by Lemma 1 there exist p̂ ≥ 0, p̂ ∈ Rn , not
both zero, such that (7.12), (7.13) and (7.14) are satisfied. Let p∗0 = p̂0 and let p∗ (·) be the solution
of (7.22) with the final condition

p∗ (tf ) = p∗0 c + p̂ = p̂0 c + p̂ .

Then (7.14) and (7.13) are respectively equivalent to (7.23) and (7.24), whereas since K(tf , t0 , x∗ (t0 )) ⊂
X(tf ), (7.26) is implied by (7.12).
(ii) Suppose p∗0 > 0 and (7.22), (7.23), (7.24), and (7.26) are satisfied. Let p̂0 = p∗0 and p̂ =
p∗ (tf ) − p∗0 c, so that (7.24) becomes equivalent to (7.13). Next if x ∈ X(tf ) we have

(p̂0 c + p̂)0 x = (p∗ (tf ))0 x

= (p∗ (tf ))0 (Φ(tf , t0 )z + w) ,
92 CHAPTER 7. CONTINUOUS-TIME LINEAR OPTIMAL CONTROL

t
K(tf , t0 , x0 ) = X(tf )
f
. x (t ) = X(t ) T T
∗
f
f
Tf

c
x0 = T 0

Figure 7.3: Situation where p̂0 = 0

7.2. MORE GENERAL BOUNDARY CONDITIONS 93

for some z ∈ T 0 and some w ∈ K(tf , t0 , 0). Hence

(p̂0 c + p̂)0 x = (p∗ (f ))0 Φ(tf , t0 )(z − x∗ (t0 ))

+(p∗ (tf ))0 (w + φ(tf , t0 )x∗ (t0 ))
= (p∗ (t0 ))0 (z − x∗ (t0 ))
+(p∗ (tf ))0 (w + Φ(tf , t0 )x∗ (t0 )) .

But by (7.23) the first term on the right vanishes, and since (w+φ(tf , t0 )x∗ (t0 )) ∈ K(tf , t0 , x∗ (t0 )),
it follows from (7.26) that the second term is bounded by (p∗ (tf ))0 x∗ (tf ). Thus

(p̂0 c + p̂)0 x∗ (tf ) ≥ (p̂0 c + p̂)0 x for all x ∈ X(tf ) ,

and so u∗ (·) is optimal by Lemma 1. ♦

Exercise 3: Suppose that the control constraint set is Ω(t) which varies continuously with t, and
we require that u(t) ∈ Ω(t) for all t. Show that Theorem 1 also holds for this case where, in (7.25),
M (t, x, p) =sup{H(t, x, v, p)|v ∈ Ω(t)}.
Exercise 4: How would you use Exercise 3 to solve Example 3 of Chapter 1?
94 CHAPTER 7. CONTINUOUS-TIME LINEAR OPTIMAL CONTROL
Chapter 8

SEQUENTIAL DECISION PROBLEMS:

CONTINUOUS-TIME OPTIMAL
CONTROL OF NONLINEAR SYSTEMS

We now present a sweeping generalization of the problem studied in the last chapter. Unfortunately
we are forced to omit the proofs of the results since they require a level of mathematical sophis-
tication beyond the scope of these Notes. However, it is possible to convey the main ideas of the
proofs at an intuitive level and we shall do so. (For complete proofs see (Lee and Markus [1967]
or Pontryagin, et al., [1962].) The principal result, which is a direct generalization of Theorem 1 of
7.2 is presented in Section 1. An alternative form of the objective function is discussed in Section
2. Section 3 deals with the minimum-time problem and Section 4 considers the important special
case of linear systems with quadratic cost. Finally, in Section 5 we discuss the so-called singular
case and also analyze Example 4 of Chapter 1.

8.1 Main Results

8.1.1 Preliminary results based on differential equation theory.
We are interested in the optimal control of a system whose dynamics are governed by the nonlinear
differential equation
ẋ(t) = f (t, x, (t), u(t)) , t0 ≤ t ≤ tf , (8.1)
where x(t) ∈ Rn is the state and u(t) ∈ Rp is the control. Suppose u∗ (·) is an optimal control
∗
and x (·) is the corresponding trajectory. In the case of linear systems we obtained the necessary
conditions for optimality by comparing x∗ (·) with trajectories x(·) corresponding to other admis-
sible controls u(·). This comparison was possible because we had an explicitly characterization of
x(·) in terms of u(·). Unfortunately when f is nonlinear such a characterization is not available.
Instead we shall settle for a comparison between the trajectory x∗ (·) and trajectories x(·) obtained
by perturbing the control u∗ (·) and the initial condition x∗ (t0 ). We can then estimate the difference
between x(·) and x∗ (·) by the solution to a linear differential equation as shown in Lemma 1 below.
But first we need to impose some regularity conditions on the differential equation (8.1). We assume
throughout that the function f : [t0 , tf ] × Rn × Rp → Rn satisfies the following conditions:

95
96 CHAPTER 8. CONINUOUS-TIME OPTIMAL CONTROL

1. for each fixed t ∈ [t0 , tf ], f (t, ·, ·) : Rn xRp → Rn is continuously differentiable in the

remaining variables (x, u),

2. except for a finite subset D ⊂ [t0 , tf ], the functions f, fx , fu are continuous on [t0 , tf ]×Rn ×
Rp , and

3. for every finite α, there exist finite number β and γ such that

|f (t, x, u)| ≤ β + γ|x| for all t ∈ [t0 , tf ], x ∈ Rn , u ∈ Rp with |u| ≤ α .

The following result is proved in every standard treatise on differential equations.

Theorem 1: For every z ∈ Rn , for every t1 ∈ [t0 , tf ], and every piecewise continuous function
u(·) : [t0 , tf ] → Rp , there exists a unique solution

x(t) = φ(t, t1 , z, u(·)) , t1 ≤ t ≤ tf ,

of the differential equation

ẋ(t) = f (t, x(t), u(t)) , t1 ≤ t ≤ tf ,
satisfying the initial condition
x(t1 ) = z .
Furthermore, for fixed t1 ≤ t2 in [t0 , tf ] and fixed u(·), the function φ(t2 , t1 , ·, u(·)) : Rn → Rn is
differentiable. Moreover, the n × n matrix-valued function Φ defined by
∂φ
Φ(t2 , t1 , z, u(·)) = ∂z (t2 , t1 , z, u(·))

is the solution of the linear homogeneous differential equation

∂t (t, t1 , z, u, (·))
∂Φ
= [ ∂f
∂x (t, x, (t), u(t))]Φ(t, t1 , z, u(·)), t1 ≤ t ≤ tf ,

and the initial condition

Φ(t1 , t1 , z, u(·)) = In .
Now let Ω ⊂ Rp be a fixed set and let U be set of all piecewise continuous functions u(·) :
[t0 , tf ] → Ω. Let u∗ (·) ∈ U be fixed and let D∗ be the set of discontinuity points of u∗ (·). Let
x∗0 ∈ Rn be a fixed initial condition.

Definition: π = (t1 , . . . , tm ; `1 , . . . , `m ; u1 , . . . , um ) is said to be a perturbation data for u∗ (·) if

1. m is a nonnegative integer,
S
2. t0 < t1 < t2 < . . . tm < tf , and ti 6∈ D ∗ D, i = 1, . . . , m (recall that D is the set of
discontinuity points of f ),

3. `i ≥ 0, i = 1, . . . , m, and

4. ui ∈ Ω, i = 1, . . . , m.
8.1. MAIN RESULTS 97

Let ε(π) T> 0 be such that for 0 ≤ ε ≤ ε(π) we have [ti − ε`i , ti ] ⊂ [t0 , tf ] for all i, and
[ti −ε`i , ti ] [tj −ε`j , tj ] = φ for i 6= j. Then for 0 ≤ ε ≤ ε(π),the perturbed control u(π,ε) (·) ∈ U
corresponding to π is defined by

ui for all t ∈ [ti − ε`i , ti ] , i = 1, . . . , m
u(π,ε) (t) =
u∗ (t) otherwise .

Definition: Any vector ξ ∈ Rn is said to be a perturbation for x∗0 , and a function x(ξ,ε) defined for
ε > 0 is said to be a perturbed initial condition if

lim x(ξ,ε) = x∗0 ,

ε→0

and
lim 1
− x∗0 ) = ξ .
ε→0 ε (x(ξ,ε)

Now let x∗ (t) = φ(t, t0 , x∗0 , u∗ (·)) and let xε (t) = φ(t, t0 , x(ξ,ε) , u(π,ε) (·)). Let Φ(t2 , t1 ) =
Φ(t2 , t1 , x∗ (t1 ), u∗ (·)). The following lemma gives an estimate of x∗ (t) − xε (t). The proof of the
lemma is a straightforward exercise in estimating differences of solutions to differential equations,
and it is omitted (see for example (Lee and Markus [1967])).

Lemma 1: lim |xε (t) − x∗ (t) − εh(π,ε) (t)| = 0 for t ∈ [t0 , t1 ], where h(π,ε) (·) is given by
ε→0

h(π,ε) (t) = Φ(t, t0 )ξ , t ∈ [t0 , t1 )

∗ ∗ ∗
= Φ(t, t0 )ξ + Φ(t, t1 )[f (t1 , x (t1 ), u1 ) − f (t1 , x (t1 ), u (t1 ))]`1 , t ∈ [t1 , t2 )
Xi
= Φ(t, t0 )ξ + Φ(t, tj )[f (tj , x∗ (tj ), uj ) − f (tj , x∗ (tj ), u∗ (tj ))]`j , t ∈ [ti , ti+1 )
j=1
X
m
= Φ(t, t0 )ξ + Φ(t, tm )[f (tj , x∗ (tj ), uj ) − f (tj , x∗ (tj ), u∗ tj ))]`j , t ∈ [tm , tf ] .
j=1

(See Figure 8.1.)

We call h(π,ξ) (·) the linearized (trajectory) perturbation corresponding to (π, ξ).
Definition: For z ∈ Rn , t ∈ [t0 , tf ] let
K(t, t0 , z) = {φ(t, t0 , z, u(·))|u(·) ∈ U}
be the set of states reachable at time t, starting at time t0 in state z, and using controls u(·) ∈ U .
Definition: For each t ∈ [t0 , tf ], let

Q(t) = {h(π,0) (t)|πis a perturbation data for u∗ (·), and

h(π,0) (·)is the linearized perturbation
corresponding to(π, 0)} .

Remark: By Lemma 1 (x∗ (t)+εh(π,ξ) ) belongs to the set K(t, t0 , x(ξ,ε) ) up to an error of order o(ε).
In particular for ξ = 0, the set x∗ (t) + Q(t) can serve as an approximation to the set K(t, t0 , x∗0 ).
More precisely we have the following result which we leave as an exercise.
98 CHAPTER 8. CONINUOUS-TIME OPTIMAL CONTROL

u
u1

u(πε) (·)
u∗ (·)

u3
u2
ε`1 ε`2 ε`3
| | | | | | |
t1 t2 t3 tf
t0

x
x∗ (·)
xε (·)

x( ξ, ε)

εhπξ

| | | |
t1 t2 t3 tf

Figure 8.1: Illustration for Lemma 1.

Exercise 1: (Recall the definition of the tangent cone in 5.1.1.) Show that

Q(t) ⊂ C(K(t, t0 , x∗0 ), x∗ (t)) . (8.2)

We can now prove a generalization of Theorem 1 of 7.1.

Theorem 2: Consider the optimal control problem (8.3):

Maximize ψ(x(tf ))
subject to
dynamics: ẋ(t) = f (t, x(t), u(t)) , t0 ≤ t ≤ tf ,
initial condition: x(t0 ) = x∗0 , (8.3)
final condition: x(tf ) ∈ Rn ,
control constraint: u(·) ∈ U , i.e., u : [t0 , tf ] → Ω and
u(·) piecewise continuous ,

where ψ : Rn → R is differentiable and f satisfies the conditions listed earlier.

Let u∗ (·) ∈ U be an optimal control and let x∗ (t) = φ(t, t0 , x∗0 , u∗ (·)), t0 ≤ t ≤ tf , be the
corresponding trajectory. Let p∗ (t), t0 ≤ t ≤ tf , be the solution of (8.4) and (8.5):

adjoint equation: ṗ∗ (t) = −[ ∂f ∗ ∗ 0 ∗

∂x (t, x (t), u (t))] p (t), t0 ≤ t ≤ tf ,
(8.4)
8.1. MAIN RESULTS 99

final condition: p∗ (tf ) = 5ψ(x∗ (tf )) . (8.5)

Then u∗ (·) satisfies the maximum principle
H(t, x∗ (t), u∗ (t), p∗ (t)) = M (t, x∗ (t), p∗ (t)) (8.6)
for all t ∈ [t0 , tf ] except possibly for a finite set. [Here H(t, x, u, p) = p0 f (t, x, u, ), M (t, x, p) =
sup{H(t, x, v, p)|v ∈ Ω}].
Proof: Since u∗ (·) is optimal we must have
ψ(x∗ (tf )) ≥ ψ(z) for all z ∈ K(tf , t0 , x∗0 ) ,
and so by Lemma 1 of 5.1.1
ψ(x∗ (tf ))h ≤ 0 for all h ∈ C(K(tf , t0 , x∗0 ), x∗ (tf )) ,
and in particular from (8.2)
ψx (x∗ (tf ))h ≤ 0 for all h ∈ Q(tf ) . (8.7)
Now suppose that (8.6) does not hold from some t∗ 6∈ D ∗ ∪ D. Then there exists v ∈ Ω such that
p∗ (t∗ )0 [f (t∗ , x(t∗ ), v) − f (t∗ , x(t∗ ), u∗ (t∗ ))] > 0 . (8.8)
If we consider the perturbation data π = (t∗ ; 1; v), then (8.8) is equivalent to
p∗ (t∗ )0 h(π,0) (t∗ ) > 0 . (8.9)
Now from (8.4) we can see that p∗ (t∗ )0 = p∗ (tf )0 Φ(tf , t∗ ). Also h(π,0) (tf ) = Φ(tf , t∗ )h(π,0) (t∗ )
so that (8.9) is equivalent to
p∗ (tf )0 h(π,0) (tf ) > 0
which contradicts (8.7). ♦

8.1.2 More general boundary conditions.

In Theorem 2 the initial condition is fixed and the final condition is free. The problem involving
more general boundary conditions is much more complicated and requires more refined analysis.
Specifically, Lemma 1 needs to be extended to Lemma 2 below. But first we need some simple
properties of the sets Q(t) which we leave as exercises.
Exercise 2: Show that
(i) Q(t) is a cone, i.e., if h ∈ Q(t) and λ ≥ 0, then λh ∈ Q(t),
(ii) for t0 ≤ t1 ≤ t2 ≤ tf , Φ(t2 , t1 )Q(t1 ) ⊂ Q(t2 ) .
Definition: Let C(t) denote the closure of Q(t).
Exercise 3: Show that
(i) C(t) is a convex cone,
(ii) for t0 ≤ t1 ≤ t2 ≤ tf , Φ(t2 , t1 )C(t1 ) ⊂ C(t2 ) .
Remark: From Lemma 1 we know that if h ∈ C(t) then (x∗ (t) + εh) belongs to K(t, t0 , x∗ (t0 )) up
to an error of order o(ε). Lemma 2, below, asserts further that if h is in the interior of C(t) then in
fact (x∗ (t) + εh) ∈ K(t, t0 , x∗ (t0 )) for ε > 0 sufficiently small. The proof of the lemma depends
upon some deep topological results and is omitted. Instead we offer a plausibility argument.
Lemma 2: Let h belong to the interior of the cone C(t). Then for all ε > 0 sufficiently small,
100 CHAPTER 8. CONINUOUS-TIME OPTIMAL CONTROL

(x∗ (t) + εh) ∈ K(t, t0 , x∗0 ) . (8.10)

Plausibility argument. (8.10) is equivalent to

εh ∈ K(t, t0 , x∗ (t0 )) − {x∗ (t)} , (8.11)

where we have moved the origin to x∗ (t). The situation is depicted in Figure 8.2.

K̂(ε)
Ĉ(ε) o(ε)
K(t1 , t0 , x∗ ) − {x∗ (t)}

εh
h
0

δε C(t)

Figure 8.2: Illustration for Lemma 2.

Let Ĉ(ε) be the cross-section of C(t) by a plane orthogonal to h and passing through εh. Let
K̂(ε) be the cross-section of K(t, t0 , x∗0 ) − {x∗ (t0 )} by the same plane. We note the following:
(i) by Lemma 1 the distance between Ĉ(ε) and K̂(ε) is of the order o(ε);
(ii) since h is in the interior of C(t), the minimum distance between εh and Ĉ(ε) is δε where
δ > 0 is independent of ε.
Hence for ε > 0 sufficiently small εh must be trapped inside the set K̂(ε).
(This would constitute a proof except that for the argument to work we need to show that there
are no “holes” in K̂(ε) through which εh can “escape.” The complications in a rigorous proof arise
precisely from this drawback in our plausibility argument.) ♦
∗ ∗
Lemmas 1 and 2 give us a characterization of K(t, t0 , x0 ) in a neighborhood of x (t) when we
perturb the control u∗ (·) leaving the initial condition fixed. Lemma 3 extends Lemma 2 to the case
when we also allow the initial condition to vary over a fixed surface in a neighborhood of x∗0 .
Let g0 : Rn → R`0 be a differentiable function such that the `0 × n matrix gx0 (x) has rank
`0 for all x. Let b0 ∈ Rn be fixed and let T 0 = {x|g0 (x) − b0 }. Suppose that x∗0 ∈ T 0 and let
T 0 (x∗0 ) = {ξ|gx0 (x∗0 )ξ = 0}. Thus, T 0 (x∗0 ) + {x∗0 } is the plane through x∗0 tangent to the surface
T 0 . The proof of Lemma 3 is similar to that of Lemma 2 and is omitted also.
Lemma 3: Let h belong to the interior of the cone {C(t)+Φ(t, t0 )T 0 (x∗0 )}. For ε ≥ 0 let h(ε) ∈ Rn
1
be such that lim h(ε) = 0, and lim ( )h(ε) = h. Then for ε > 0 sufficiently small there exists
ε→0 ε
x0 (ε) ∈ T 0 such that

(x∗ (t) + h(ε)) ∈ K(t, t0 , x0 (ε)) .

8.1. MAIN RESULTS 101

We can now prove the main result of this chapter. We keep all the notation introduced above.
Further, let gf : Rn → R`f be a differentiable function such that gxf (x) has rank `f for all x.
Let bf ∈ Rn be fixed and let T f = {x|gf (x) − bf }. Finally, if x∗ (tf ) ∈ T f let T f (x∗ (tf )) =
{ξ|gxf (x∗ (tf ))ξ = 0}.

Theorem 3: Consider the optimal control problem (8.12):

Maximize ψ(x(tf ))
subject to
dynamics: ẋ(t) = f (t, x(t), u(t)) , t0 ≤ t ≤ tf ,
initial conditions: g0 (x(t0 )) = b0 , (8.12)
final conditions: gf (x(tf )) = bf ,
control constraint: u(·) ∈ U , i.e., u : [t0 , tf ] → Ω and
u(·) piecewise continuous .

Let u∗ (·) ∈ U , let x∗0 ∈ T 0 and let x∗ (t) = φ(t, t0 , x∗0 , u∗ (·)) be the corresponding trajectory.
Suppose that x∗ (tf ) ∈ T f , and suppose that (u∗ (·), x∗0 ) is optimal. Then there exist a number
p∗0 ≥ 0, and a function p∗ : [t0 , tf ] → Rn , not both identically zero, satisfying

adjoint equation: ṗ∗ (t) = −[ ∂f ∗ ∗ 0 ∗

∂x (t, x (t), u (t))] p (t), t0 ≤ t ≤ tf ,
(8.13)

initial condition: p∗ (t0 )⊥T 0 (x∗0 ) , (8.14)

final condition: (p∗ (tf ) − p∗0 ∇ψ(x∗ (tf )))⊥T f (x∗ (tf )) . (8.15)

Furthermore, the maximum principle

H(t, x∗ (t), u∗ (t), p∗ (t)) = M (t, x∗ (t), p∗ (t)) (8.16)

holds for all t ∈ [t0 , tf ] except possibly for a finite set. [Here H(t, x, p, u) = p0 f (t, x, u, ), M (t, x, p) =
sup{H(t, x, v, p)|v ∈ Ω}].

Proof: We break the proof up into a series of steps.

Step 1. By repeating the argument presented in the proof of Theorem 2 we can see that (8.15) is
equivalent to

p∗ (tf )0 h ≤ 0 for all h ∈ C(tf ) . (8.17)

Step 2. Define two convex sets S1 , S2 in R1+m as follows:

S1 = {(y, h)|y > 0, h ∈ T f (x∗ (tf ))},
S2 = {(y, h)|y = ψx (x∗ (tf ))h, h ∈ {C(tf ) + Φ(tf , t0 )T 0 (x∗0 )}} .
We claim that the optimality of (u∗ (·), x∗0 ) implies that S1 ∩ Relative Interior (S2 ) = φ. Suppose
this is not the case. Then there exists h ∈ T f (x∗ (tf )) such that

ψx (x∗ (tf ))h > 0 , (8.18)

102 CHAPTER 8. CONINUOUS-TIME OPTIMAL CONTROL

h ∈ Interior{C(tf ) + Φ(tf , t0 )T 0 (x∗0 )} . (8.19)

Now by assumption gxf (x∗ (tf ) has maximum rank. Since gxf (x∗ (tf ))h = 0 it follows that the
Implicit Function Theorem that for ε > 0 sufficiently small there exists h(ε) ∈ Rn such that

gf (x∗ (tf ) + h(ε)) = bf , (8.20)

and, moreover, h(ε) → 0, (1/ε)h(ε) → h as ε → 0. From (8.18) and Lemma 3 it follows that for
ε > 0 sufficiently small there exists x0 (ε) ∈ T 0 and uε (·) ∈ U such that

x∗ (tf ) + h(ε) = φ(tf , t0 , x0 (ε), uε (·)) .

Hence we can conclude from (8.20) that the pair (x0 (ε), uε (·)) satisfies the initial and final condi-
tions, and the corresponding value of the objective function is

ψ(x∗ (tf ) + h(ε)) = ψ(x∗ (tf )) + ψx (x∗ (tf ))h(ε) + o(|h(ε)|) ,

and since h(ε) = εh + o(ε) we get

ψ(x∗ (tf ) + h(ε)) = ψ(x∗ (tf )) + ε)ψx (x∗ (tf ))h + o(ε) ;

but then from (8.18)

ψ(x∗ (tf ) + h(ε)) > ψ(x∗ (tf ))

for ε > 0 sufficiently small, thereby contradicting the optimality of (u∗ (·), x∗0 ).
Step 3. By the separation theorem for convex sets there exist p̂0 ∈ R, p̂1 ∈ Rn , not both zero, such
that

p̂0 y 1 + p̂01 h1 ≥ p̂0 y 2 + p̂01 h2 for all (y i , hi ) ∈ S1 , i = 1, 2 . (8.21)

Arguing in exactly the same fashion as in the proof of Lemma 1 of 7.2 we can conclude that (8.21)
is equivalent to the following conditions:

p̂0 ≥ 0 ,
(8.22)
p̂1 ⊥T f (x∗ (tf )) ,

Φ(tf , t0 )0 (p̂0 ∇ψ(x∗ (tf )) + p̂1 )⊥T 0 (x∗0 ) , (8.23)

and

(p̂0 ψx (x∗ (tf )) + p̂01 )h ≤ 0 for all h ∈ C(tf ) . (8.24)

If we let p̂∗0 = p̂0 and p∗ (tf ) = p̂0 ∇ψ(x∗ (tf )) + p̂1 then (8.22), (8.23), and (8.24) translate respec-
tively into (8.15), (8.14), and (8.17). ♦
8.2. INTEGRAL OBJECTIVE FUNCTION 103

8.2 Integral Objective Function

In many control problems the objective function is not given as a function ψ(x(tf )) of the final
state, but rather as an integral of the form
Z tf
f0 (t, x(t), u(t))dt . (8.25)
t0
The dynamics of the state, the boundary conditions, and control constraints are the same as before.
We proceed to show how such objective functions can be treated as a special case of the problems
of the last section. To this end we defined the augmented system with state variable x̃ = (x0 , x) ∈
R1+m as follows:
   
· ẋ0 (t) ˜ f0 (t, x(t), u(t))
x̃= = f (t, x̃(t), u(t)) = .
ẋ(t) f (t, x(t), u(t))
The initial and final conditions which are of the form
   
0 0 0 x0 0 0
g (x) = b , g (x) = b are augmented g̃ (x̃) =
f f
= b̃ =
g0 (x) b0
and g̃f (x̃) = gf (x) = bf . Evidently then the problem of maximizing (8.25) is equivalent to the
problem of maximizing
ψ(x̃(tf )) = x0 (tf ) ,
subject to the augmented dynamics and constraints which is of the form treated in Theorem 3 of
Section 1, and we get the following result.
Theorem 1: Consider the optimal control problem (8.26):
Z tf
Maximize f0 (t, x(t), u(t))dt
t0
subject to
dynamics: ẋ(t) = f (t, x(t), u(t)), t0 ≤ t ≤ tf , (8.26)
initial conditions: g0 (x(t0 )) = b0 ,
final conditions: gf (x(tf )) = bf ,
control constraint: u(·) ∈ U .
Let u∗ (·) ∈ U , let x∗0 ∈ T o and let x∗ (t) = φ(t, t0 , x∗0 , u∗ (·)), and suppose that x∗ (tf ) ∈ T f . If
(u∗ (·), x∗0 ) is optimal, then there exists a function p̃∗ = (p∗0 , p∗ ) : [t0 , tf ] → R1+m , not identically
zero, and with p∗0 (t) ≡ constant and p∗0 (t) ≥ 0, satisfying
· ˜
(augmented) adjoint equation: p̃∗ (t) = −[ ∂∂ fx̃ (t, x∗ (t), u∗ (t))]0 p̃∗ (t) ,
initial condition: p∗ (t0 )⊥T 0 (x∗0 ) ,
final condition: p∗ (tf )⊥T f (x∗ (tf )) .
Futhermore, the maximum principle
H̃(t, x∗ (t), p̃∗ (t), u∗ (t)) = M̃ (t, x∗ (t), p̃∗ (t))
holds for all t ∈ [t0 , tf ] except possibly for a finite set. [Here H̃(t, x, p̃, u) = p̃0 f˜(t, x, u) =
p0 f0 (t, x, u) + p0 f (t, x, u), and M̃ (t, x, p̃) = sup{H̃(t, x, p̃, v)|v ∈ Ω}.]
Finally, if f0 and f do not explicitly depend on t, then M̃ (t, x∗ (t), p̃∗ (t)) ≡ constant.
Exercise 1: Prove Theorem 1. (Hint: For the final part show that (d/dt) M̃ (t, x∗ (t), p̃∗ (t)) ≡ 0.)
104 CHAPTER 8. CONINUOUS-TIME OPTIMAL CONTROL

8.3 Variable Final Time

8.3.1 Main result.
In the problem considered up to now the final time tf is assumed to be fixed. In many important
cases the final time is itself a decision variable. One such case is the minimum-time problem where
we want to transfer the state of the system from a given initial state to a specified final state in
minimum time. More generally, consider the optimal control problem (8.27).

Z tf
Maximize f0 (t, x(t), u(t))dt
t0
subject to
dynamics: ẋ(t) = f (t, x, (t), u(t)), , t0 ≤ t ≤ tf ,
(8.27)
initial condition: g0 (x(t0 )) = b0 ,
final condition: gf (x(t)f )) = bf ,
control constraint: u(·) ∈ U ,
final-time constraint: tf ∈ (t0 , ∞) .

We analyze (8.27) by converting the variable time interval [t0 , tf ] into a fixed-time interval [0, 1].
This change of time-scale is achieved by regarding t as a new state variable and selecting a new
time variable s which ranges over [0, 1]. The equation for t is

dt(s)
ds = α(s) , 0 ≤ s ≤ 1 ,

with initial condition

t(0) = t0 .

Here α(s) is a new control variable constrained by α(s) ∈ (0, ∞). Now if x(·) is the solution of

ẋ(t) = f (t, x(t), u(t)) , t0 ≤ t ≤ tf , x(t0 ) = x0 (8.28)

and if we define

z(s) = x(t(s)), v(s) = u(t(s)) , 0 ≤ s ≤ 1 ,

then it is easy to see that z(·) is the solution of

ds (s) = α(s)f (s, z(s), v(s)) , 0 ≤ s ≤ 1 z(0) = x0 .

dz
(8.29)

Conversely from the solution z(·) of (8.29) we can obtain the solution x(·) of (8.28) by

x(t) = z(s(t)) , t0 ≤ t ≤ tf ,

where s(·) : [t0 , tf ] → [0, 1] is the functional inverse of s(t); in fact, s(·) is the solution of the
differential equation ṡ(t) = 1/α(s(t)), s(t0 ) = 0.
8.3. VARIABLE FINAL TIME 105

With these ideas in mind it is natural to consider the fixed-final-time optimal control problem
(8.30), where the state vector (t, z) ∈ R1+m , and the control (α, v) ∈ R1+p :
Z 1
Maximize f0 (t(s), z(s), v(s))α(s)ds
0
subject to
dynamics: (ż(s), ṫ(s)) = (f (t(s), z(s), v(s))α(s), α(s)),
(8.30)
initial constraint: g0 (z(0)) = b0 , t(0) = t0 ,
final constraint: gf (z(1)) = bf , t(1) ∈ R ,
control constraint: (v(s), α(s)) ∈ Ω × (0, ∞)
for 0 ≤ s ≤ 1 and v(·), α(·) piecewise continuous.

The relation between problems (8.27) and (8.30) is established in the following result.

Lemma 1: (i) Let x∗0 ∈ T 0 , u∗ (·) ∈ U, t∗f ∈ (t0 , ∞) and let x∗ (t) = φ(t, t0 , x∗0 , u∗ (·)) be the
corresponding trajectory. Suppose that x∗ (t∗f ) ∈ T f , and suppose that (u∗ (·), x∗0 , t∗f ) is optimal for
(8.27). Define z0∗ , v ∗ (·), and α∗ (·) by

z0∗ = x∗0
v (s) = u∗ (t0 + s(t∗f − t0 )) , 0 ≤ s ≤ 1 ,
∗

α∗ (s) = (t∗f − t0 ) , 0≤s≤1.

Then ((v ∗ (·), α∗ (·)), z0∗ ) is optimal for (8.30).

(ii) Let z0∗ ∈ T 0 , and let (v ∗ (·), α∗ (·)) be an admissible control for (8.30) such that the correspond-
ing trajectory (t∗ (·), z ∗ (·)) satisfies the final conditions of (8.30). Suppose that ((v ∗ (·), α∗ (·)), z0∗ )
is optimal for (8.30). Define x∗0 , u∗ (·) ∈ U , and t∗f by

x∗0 = z0∗ ,
u∗ (t) = v ∗ (s∗ (t)) , t0 ≤ t ≤ t∗f ,
t∗f = t∗ (1) ,

where s∗ (·) is functional inverse of t∗ (·). Then (u∗ (·), z0∗ , t∗f ) is optimal for (8.27).

Exercise 1: Prove Lemma 1.

Theorem 1: Let u∗ (·) ∈ U, let x∗0 ∈ T 0 , let t∗f ∈ (0, ∞), and let
x∗ (t) = φ(t, t0 , x∗0 , u∗ (·)), t0 ≤ t ≤ tf , and suppose that x∗ (t∗f ) ∈ T f . If (u∗ (·), x∗0 , t∗f ) is optimal
for (8.27), then there exists a function p̃∗ = (p∗0 , p∗ ) : [t0 , t∗f ] → R1+m , not identically zero, and
with p∗0 (t) ≡ constant and p∗0 (t) ≥ 0, satisfying

(augmented) adjoint equation:

·∗ ˜ (8.31)
p̃ (t) = −[ ∂∂ fx̃ (t, x∗ (t), u∗ (t))]0 p̃∗ (t) ,

initial condition: p∗ (t0 )⊥T 0 (x∗0 ) , (8.32)

106 CHAPTER 8. CONINUOUS-TIME OPTIMAL CONTROL

final condition: p∗ (t∗f )⊥T f (x∗ (t∗f )) . (8.33)

Also the maximum principle

H̃(t, x∗ (t), p̃∗ (t), u∗ (t)) = M̃ (t, x∗ (t), p̃∗ (t)) , (8.34)

holds for all t ∈ [t0 , tf ] except possibly for a finite set. Furthermore, t∗f must be such that

Ĥ(t∗f , x∗ (t∗f ), p̃∗ (t∗f ), u∗ (t∗f )) = 0 . (8.35)

Finally, if f0 and f do not explicitly depend on t, then M̂ (t, x∗ (t), p̃∗ (t)) ≡ 0.

Proof: By Lemma 1, z0∗ = x∗0 , v ∗ (s) = u∗ (t0 + s(t∗f − t0 )) and α∗ (s) = (t∗f − t0 ) for 0 ≤ s ≤ 1
constitute an optimal solution for (8.30). The resulting trajectory is
z ∗ (s) = x∗ (t0 + s(t∗f − t0 )), t∗ (s) = t0 + s(t∗f − t0 ), 0 ≤ s ≤ 1 , so that in particular
z ∗ (1) = x∗ (t∗f ).
By Theorem 1 of Section 2, there exists a function λ̃∗ = (λ∗0 , λ∗ , λ∗n+1 ) : [0, 1] → R1+n+1 , not
identically zero, and with λ∗0 (s) ≡ constant and λ∗0 (s) ≥ 0, satisfying

   
λ̇∗0 (t) 0
 λ̇∗ (t)   {[ ∂f0 (t∗ (s), z ∗ (s), v ∗ (s))]0 λ∗ (s) 
   0 
 = − 
∂z
adjoint equation: 
   +[ ∂f ∗
(t (s), z ∗ (s), v ∗ (s))]0 λ∗ (s)}α∗ (s)
 (8.36)
 λ̇∗ (t)   ∂f ∂z
∗ ∗ ∗ 0 ∗ 
n+1  {[ ∂t (t (s), z (s), v (s))] λ0 (s)
0

+[ ∂t (t (s), z ∗ (s), v ∗ (s))]0 λ∗ (s)}α∗ (s)
∂f ∗

initial condition: λ∗ (0)⊥T 0 (z0∗ ) (8.37)

final condition: λ∗ (1)⊥T f (z ∗ (1)) , λ∗n+1 (1) = 0 . (8.38)

Furthermore, the maximum principle

λ∗0 (s)f0 (t∗ (s), z ∗ (s), v ∗ (s))α∗ (s)

+λ∗ (s)0 f (t∗ (s), z ∗ (s), v ∗ (s))α∗ (s) + λ∗n+1 (s)α∗ (s)
(8.39)
= sup{[λ∗0 (s)f0 (t∗ (s), z ∗ (s), w)β
+λ∗ (s)0 f (t∗ (s), z ∗ (s), w)β + λ∗n+1 (s)β]|w ∈ Ω, β ∈ (0, ∞)}

holds for all s ∈ [0, 1] except possibly for a finite set.

Let s∗ (t) = (t − t0 )/(t∗f − t0 ), t0 ≤ t ≤ t∗f , and define p̃∗ = (p∗0 , p∗ ) : [t0 , t∗f ] → R1+n by

p∗0 (t) = λ∗0 (s∗ (t)), p∗ (t) = λ∗ (s∗ (t)), t0 ≤ t ≤ t∗f . (8.40)

First of all, p̃∗ is not identically zero. Because if p̃∗ ≡ 0, then from (8.40) we have (λ∗0 , λ∗ ) ≡ 0 and
then from (8.36), λ∗n+1 ≡ constant, but from (8.38), λ∗n+1 (1) = 0 so that we would have λ̃∗ ≡ 0
8.3. VARIABLE FINAL TIME 107

which is a contradiction. It is trivial to verify that p̃∗ (·) satisfies (8.31), and, on the other hand (8.37)
and (8.38) respectively imply (8.32) and (8.33). Next, (8.39) is equivalent to

λ∗0 (s)f0 (t∗ (s), z ∗ (s), v ∗ (s))

(8.41)
+λ∗ (s)0 f (t∗ (s), z ∗ (s), v ∗ (s)) + λ∗n+1 (s) = 0
and
λ∗0 (s)f0 (t∗ (s), z ∗ (s), v ∗ (s)) + λ∗ (s)0 f (t∗ (s), z ∗ (s), v ∗ (s))
(8.42)
= Sup {[λ∗0 (s)f0 (t∗ (s), z ∗ (s), w) + λ∗ (s)0 f (t∗ (s), z ∗ (s), w)]|w ∈ Ω}.
Evidently (8.42) is equivalent to (8.34) and (8.35) follows from (8.41) and the fact that λ∗n+1 (1) = 0.
Finally, the last assertion of the Theorem follows from (8.35) and the fact that M̃ (t, x∗ (t), p̃∗ (t)) ≡
constant if f0 , f are not explicitly dependent on t. ♦

8.3.2 Minimum-time problems

.
We consider the following special case of (8.27):
Z tf
Maximize (−1)dt
t0
subject to
dynamics: ẋ(t) = f (t, x(t), u(t)), t0 ≤ t ≤ tf
(8.43)
initial condition: x(t0 ) = x0 ,
final condition: x(tf ) = xf ,
control constraint: u(·) ∈ U ,
final-time constraint: tf ∈ (t0 , ∞) .
In (8.43), x0 , xf are fixed, so that the optimal control problem consists of finding a control which
transfers the system from state x0 at time t0 to state xf in minimum time. Applying Theorem 1 to
this problem gives Theorem 2.
Theorem 2: Let t∗f ∈ (t0 , ∞) and let u∗ : [t0 , t∗f ] → Ω be optimal. Let x∗ (·) be the corresponding
trajectory. Then there exists a function p∗ : [t0 , t∗f ] → Rn , not identically zero, satisfying
adjoint equation: ṗ∗ (t) = −[ ∂f ∗ ∗ 0 ∗ ∗
∂x (t, x (t), u (t))] p (t), t0 ≤ t ≤ tf ,
initial condition: p∗ (t0 ) ∈ Rn ,
final condition: p∗ (t∗f ) ∈ Rn .
Also the maximum principle

H(t, x∗ (t), p∗ (t), u∗ (t)) = M (t, x∗ (t), p∗ (t)) (8.44)

holds for all t ∈ [t0 , t∗f ] except possibly for a finite set.
Finally,
M (t∗f , x∗ (tf ), p∗ (tf )) ≥ 0 (8.45)
and if f does not depend explicitly on t then

M (t, x∗ (t), p∗ , (t)) ≡ constant . (8.46)

108 CHAPTER 8. CONINUOUS-TIME OPTIMAL CONTROL

Exercise 2: Prove Theorem 2.

We now study a simple example illustrating Theorem 2. Example 1: The motion of a particle is
described by

mẍ(t) + σ ẋ(t) = u(t) ,

where m = mass, σ = coefficient of friction, u = applied force, and x = position of the particle. For
simplicity we suppose that x ∈ R, u ∈ R and u(t) constrained by |u(t)| ≤ 1. Starting with an
initial condition x(0) = x01 , ẋ(0) = x02 we wish to find an admissible control which brings the
particle to the state x = 0, ẋ = 0 in minimum time.

Solution: Taking x1 = x, x2 = ẋ we rewrite the particle dynamics as

      
ẋ1 (t) 0 1 x1 (t) 0
= + u(t) , (8.47)
ẋ2 (t) 0 −α x2 (t) b

where α = (σ/m) > 0 and b = (1/m) > 0. The control constraint set is Ω = [−1, 1].
Suppose that u∗ (·) is optimal and x∗ (·) is the corresponding trajectory. By Theorem 2 there exists
a non-zero solution p∗ (·) of

    
ṗ∗1 (t) 0 0 p∗1 (t)
=− (8.48)
ṗ∗2 (t) 1 −α p∗2 (t)

such that (8.44), (8.45), and (8.46) hold. Now the transition matrix function of the homogeneous
part of (8.47) is

 1

1 α (1 − e−α(t−τ ) )
Φ(t, τ ) = ,
0 e−α(t−τ )

so that the solution of (8.48) is

 ∗    
p1 (t) 1 0 p∗1 (0)
= 1 ,
p∗2 (t) α (1 − e )
αt eαt p∗2 (0)
or
p∗1 (t) ≡ p∗1 (0) ,

and
1 ∗
p∗2 (t) = α p1 (0) + eαt (− α1 p∗1 (0) + p∗2 (0)) . (8.49)

The Hamiltonian H is given by

H(x∗ (t), p∗ (t), v) = (p∗1 (t) − αp∗2 (t))x∗2 (t) + bp∗2 (t)v
= eαt (p∗1 (0) − αp∗2 (0))x∗2 (t) + pb∗2 (t)v ,
8.3. VARIABLE FINAL TIME 109

so that from the maximum principle we can immediately conclude that


 +1 if p∗2 (t) > 0,
∗
u (t) = −1 if p∗2 (t) < 0, (8.50)

? if p∗2 (t) = 0 .

Furthermore, since the right-hand side of (8.47) does not depend on t explicitly we must also have

eαt (p∗1 (0) − αp∗2 (0))x∗2 (t) + bp∗2 (t)u∗ (t) ≡ constant. (8.51)

We now proceed to analyze the consequences of (8.49) and (8.50). First of all since p∗1 (t) ≡
p∗1 (0), p∗2 (·)
can have three qualitatively different forms.
Case 1. −p∗1 (0) + αp∗2 (0) > 0: Evidently then, from (8.49) we see that p∗2 (t) must be a strictly
monotonically increasing function so that from (8.50) u∗ (·) can behave in one of two ways:

either


∗ −1 for t < t̂ and p∗2 (t) < 0 for t < t̂,
u (t) =
+1 for t > t̂ and p∗2 (t) > 0 for t > t̂,

or

u∗ (t) ≡ +1 and p∗2 (t) > 0 for all t.

Case 2. −p∗1 (0) + αp∗2 (0) < 0 : Evidently u∗ (·) can behave in one of two ways:

either

∗ +1 for t < t̂ and p∗2 (t) > 0 for t < t̂,
u (t) =
−1 for t > t̂ and p∗2 (t) < 0 for t > t̂,

or

u∗ (t) ≡ −1 and p∗ (t) < 0 for all t.

Case 3. −p∗1 (0) + αp∗2 (0) = 0 : In this case p∗2 (t) ≡ (1/α)p∗1 (0). Also since p∗ (t) 6≡ 0, we must
have in this case p∗1 (0) 6= 0. Hence u∗ (·) we can behave in one of two ways:

either

1 ∗
u∗ (t) ≡ +1 and p∗2 (t) ≡ α p1 (0) >0,

or
1 ∗
u∗ (t) ≡ −1 and p∗2 (t) ≡ α p1 (0) <0,
110 CHAPTER 8. CONINUOUS-TIME OPTIMAL CONTROL

Thus, the optimal control u∗ is always equal to +1 or -1 and it can switch at most once between
these two values. The optimal control is given by

u∗ (t) = sgn p∗2 (t)

= sgn [ α1 p∗1 (0) + eαt (− α1 p∗1 (0) + p∗2 (0))] .

Thus the search for the optimal control reduces to finding p∗1 (0), p∗2 (0) such that the solution of the
differential equation

ẋ = x2
(8.52)
ẋ2 = −αx2 + b sgn[ α1 p∗1 (0) + eαt (− α1 p∗1 (0) + p∗2 (0))] ,

with initial condition

x1 (0) = x10 , x20 = x20 (8.53)

also satisfies the final condition

x1 (t∗f ) = 0, x2 (t∗f ) = 0 , (8.54)

for some t∗f > 0; and then t∗f is the minimum time.
There are at least two ways of solving the two-point boundary value problem (8.52), (8.53), and
(8.54). One way is to guess at the value of p∗ (0) and then integrate (8.52) and (8.53) forward in time
and check if (8.54) is satisfied. If (8.54) is not satisfied then modify p∗ (0) and repeat. An alternative
is to guess at the value of p∗ (0) and then integrate (8.52) and (8.54) backward in time and check of
(8.53) is satisfied. The latter approach is more advantageous because we know that any trajectory
obtained by this procedure is optimal for initial conditions which lie on the trajectory. Let us follow
this procedure.
Suppose we choose p∗ (0) such that −p∗1 (0) = αp∗2 (0) = 0 and p∗2 (0) > 0. Then we must have
∗
u (t) ≡ 1. Integrating (8.52) and (8.54) backward in time give us a trajectory ξ(t) where

ξ˙1 (t) = −ξ˙2 (t)

ξ˙2 (t) = αξ2 (t) − b ,

with

ξ1 (0) − ξ2 (0) = 0 .

This gives
eαt −1
ξ1 (t) = αb (−t + α ) , ξ2 (t) = α (1
b
− eαt ) ,

which is the curve OA in Figure 8.3.

On the other hand, if p∗ (0) is such that −p∗1 (0) + αp∗2 (0) = 0 and p∗2 (0) < 0, then u∗ (t) ≡ −1
and we get
eαt −1
ξ1 (t) = − αb (−t + α ) , ξ2 (t) = − αb (1 − eαt ) ,

which is the curve OB.

8.3. VARIABLE FINAL TIME 111

ξ1
u∗ ≡ −1
B D
u∗ ≡ 1
C
O ξ2

E u∗ ≡ 1

u∗ ≡ −1 A
F

Figure 8.3: Backward integration of (8.52) and (8.54).

Next suppose p∗ (0) is such that −p∗1 (0) + αp∗2 (0) > 0, and p∗2 (0) < 0. Then [(1/α)p∗1 (0) +
eαt (−(1/α)p∗1 (0) + p∗2 (0))] will have a negative value for t ∈ (0, t̂) and a positive value for t ∈
(t̂, ∞). Hence, if we integrate (8.52), (8.54) backwards in time we get trajectory ξ(t) where

˙ = −ξ2 (t)
ξ(t) 
˙ξ2 (t) = αξ2 (t)+ −b for t < t̂
b for t > t̂ ,

with ξ1 (0) = 0, ξ2 (0) = 0. This give us the curve OCD. Finally if p∗ (0) is such that −p∗1 (0) +
αp∗2 (0) < 0, and p∗2 (0) < 0, then u∗ (t) = 1 for t < t̂ and u∗ (t) = −1 for t > t̂, and we get the
curve OEF .
We see then that the optimal control u∗ (·) has the following characterizing properties:

∗ 1 if x∗ (t) is above BOA or on OA
u (t) =
−1 if x∗ (t) is below BOA or on OB .

Hence we can synthesize the optimal control in feedback from: u∗ (t) = ψ(x∗ (t)) where the

B u∗ ≡ −1 x2

u∗ ≡ 1

x1
u∗ ≡ −1 O

u∗ ≡ 1A

Figure 8.4: Optimal trajectories of Example 1.

112 CHAPTER 8. CONINUOUS-TIME OPTIMAL CONTROL

function ψ : R2 → {1, −1} is given by (see Figure 8.4)


1 if (x1 , x2 ) is above BOA or on OA
ψ(x1 , x2 ) =
−1 if (x1 , x2 ) is below BOA or on OB .

8.4 Linear System, Quadratic Cost

An important class of problems which arise in practice is the case when the dynamics are linear and
the objective function is quadratic. Specifically, consider the optimal control problem (8.55):
Z T
1 0
Minimize [x (t)P (t)x(t) + u0 (t)Q(t)u(t)]dt
0 2
subject to
dynamics: ẋ(t) = A(t)x(t) + B(t)u(t), 0 ≤ t ≤ T , (8.55)
initial condition: x(0) = x0 ,
final condition: Gf x(t) = bf ,
control constraint: u(t) ∈ Rp , u(·) piecewise continuous.

In (8.56) we assume that P (t) is an n × n symmetric, positive semi-definite matrix whereas Q(t) is
a p × p symmetric, positive definite matrix. Gf is a given `f × n matrix, and x0 ∈ Rn , bf ∈ R`f
are given vectors. T is a fixed final time.
We apply Theorem 1 of Section 2, so that we must search for a number p∗0 ≥ 0 and a function
∗
p : [0, T ] → Rn , not both zero, such that

ṗ∗ (t) = −p∗0 (−P (t)x∗ (t)) − A0 (t)p∗ (t) , (8.56)

and

p∗ (t)⊥T f (x∗ (t)) = {ξ|Gf ξ = 0} . (8.57)

The Hamiltonian function is

H(t, x∗ (t), p̃∗ (t), v) = − 12 p∗0 [x∗ (t)0 P (t)x∗ (t) + v 0 Q(t)v]
+p∗ (t)0 [A(t)x∗ (t) + B(t)v]

so that the optimal control u∗ (t) must maximize

− 12 p∗0 v 0 Q(t)v + p∗ (t)0 B(t)v for v ∈ Rp . (8.58)

If p∗0 > 0, this will imply

1
u∗ (t) = −1 0 ∗
p∗0 Q (t)B (t)p (t) , (8.59)

whereas if p∗0 = 0, then we must have

p∗ (t)0 B(t) ≡ 0 (8.60)

because otherwise (8.58) cannot have a maximum.

8.5. THE SINGULAR CASE 113

We make the following assumption about the system dynamics.

Assumption: The control system ẋ(t) = A(t)x(t) + B(t)u(t) is controllable over the interval
[0, T ]. (See (Desoer [1970]) for a definition of controllability and for the properties we use below.)
Let Φ(t, τ ) be the transition matrix function of the homogeneous linear differential equation ẋ(t) =
A(t)x(t). Then the controllability assumption is equivalent to the statement that for any ξ ∈ Rn

ξ 0 Φ(t, τ )B(τ ) = 0 , 0 ≤ τ ≤ T , implies ξ = 0 . (8.61)

Next we claim that if the system is controllable then p∗0 6= 0, because if p∗0 = 0 then from (8.56)
we can see that

p∗ (t) = (Φ(T, t))0 p∗ (T )

and hence from (8.60)

(p∗ (t))0 Φ(T, t)B(t) = 0 , 0 ≤ t ≤ T ,

but then from (8.61) we get p∗ (T ) = 0. Hence if p∗0 = 0, then we must have p̃∗ (t) ≡ 0 which is a
contradiction. Thus, under the controllability assumption, p∗0 > 0, and hence the optimal control is
given by (8.59). Now if p∗0 > 0 it is trivial that p̂∗ (t) = (1, (p∗ (t)/p∗0 )) will satisfy all the necessary
conditions so that we can assume that p∗0 = 1. The optimal trajectory and the optimal control is
obtained by solving the following two-point boundary value problem:

ẋ∗ (t) = A(t)x∗ (t) + B(t)Q−1 (t)B 0 (t)p∗ (t)

ṗ(t) = P (t)x∗ (t) − A0 (t)p∗ (t)
x∗ (0) = x0 , Gf x∗ (T ) = bf , p∗ (T )⊥T f (x∗ (T )) .

For further details regarding the solution of this boundary value problem and for related topics see
(See and Markus [1967]).

8.5 The Singular Case

In applying the necessary conditions derived in this chapter it sometimes happens that H(t, x∗ (t), p∗ (t), v)
is independent of v for values of t lying in a non-zero interval. In such cases the maximum principle
does not help in selecting the optimal value of the control. We are faced with the so-called singular
case (because we are in trouble–not because the situation is rare). We illustrate this by analyzing
Example 4 of Chapter 1.
The problem can be summarized as follows:
Z T Z T
Maximize c(t)dt = (1 − s(t))f (k(t))dt
0 0
subject to
dynamics: k̇(t) = s(t)f (k(t)) − µk(t) , 0 ≤ t ≤ T
initial constraint: k(0) = k0 ,
final constraint: k(t) ∈ R ,
control constraint: s(t) ∈ [0, 1], s(·) piecewise continuous.
114 CHAPTER 8. CONINUOUS-TIME OPTIMAL CONTROL

We make the following assumptions regarding the production function f :

fk (k) > 0, fkk (K) < 0 for all k , (8.62)

lim fk (k) = ∞ . (8.63)

k→0

Assumption (8.62) says that the marginal product of capital is positive and this marginal product
decreases with increasing capital. Assumption (8.63) is mainly for technical convenience and can
be dispensed with without difficulty.
Now suppose that s∗ : [0, T ] → [0, 1] is an optimal savings policy and let k∗ (t), 0 ≤ t ≤ T ,
be the corresponding trajectory of the capital-to-labor ratio. Then by Theorem 1 of Section 2, there
exist a number p∗0 ≥ 0, and a function p∗ : [0, T ] → R, not both identically zero, such that

ṗ∗ (t) = −p∗0 (1 − s∗ (t))fk (k∗ (t)) − p∗ (t)[s∗ (t)fk (k∗ (t)) − µ] (8.64)

with the final condition

p∗ (T ) = 0 , (8.65)

and the maximum principle holds. First of all, if p∗0 = 0 then from (8.64) and (8.65) we must also
have p∗ (t) ≡ 0. Hence we must have p∗0 > 0 and then by replacing (p∗0 , p∗ ) by (1/p∗0 )(p∗0 , p∗ ) we
can assume without losing generality that p∗0 = 1, so that (8.64) simplifies to

ṗ∗ (t) = −1(1 − s∗ (t))fk (k∗ (t)) − p∗ (t)[s∗ (t)fk (k∗ (t)) − µ] . (8.66)

The maximum principle says that

H(t, k∗ (t), p∗ (t), s) = (1 − s)f (k∗ (t)) + p∗ (t)[sf (k∗ (t)) − µk∗ (t)]

is maximized over s ∈ [0, 1] at s∗ (t), which immediately implies that


 1 if p∗ (t) > 1
∗
s (t) = 0 if p∗ (t) < 1 (8.67)

? if p∗ (t) = 1

We analyze separately the three cases above.

Case 1. p∗ (t) > 1, s∗ (t) = 1 : Then the dynamic equations become

k̇∗ (t) = f (k∗ (t)) − µk∗ (t) ,

(8.68)
ṗ∗ (t) = −p∗ (t)[fk (k∗ (t)) − µ] .

The behavior of the solutions of (8.68) is depicted in the (k, p)−, (k, t)− and (p, t)−planes in
Figure 8.5. Here kG , kH are the solutions of fk (kG ) − µ = 0 and f (kM ) − µk = 0. Such solutions
exist and are unique by virtue of the assumptions (8.62) and (8.63). Futhermore, we note from
< < >
(8.62) that kG < kM , and fk (k) − µ > 0 according as k > kG whereas f (k) − µk < 0 according
<
as k > kM . (See Figure 8.6.)
8.5. THE SINGULAR CASE 115

p fk < µ k
fk > µ
kM
l
f > µk f < µk
k t
kG kM

Figure 8.5: Illustration for Case 1.

Case 2. p∗ (t) < 1, s∗ (t) = 0: Then the dynamic equations are

k̇∗ (t) = −µk∗ (t) ,

ṗ∗ (t) = −fk (k∗ (t)) + µp∗ (t) ,

giving rise to the behavior illustrated in Figure 8.7.

Case 3. p∗ (t) = 1, s∗ (t) =?: (Possibly singular case.) Evidently if p∗ (t) = 1 only for a finite set of
times t then we do not have to worry about this case. We face the singular case only if p∗ (t) = 1
for t ∈ I, where I is a non-zero interval. But then we have ṗ∗ (t) = 0 for t ∈ I so that from (8.66)
we get

−(1 − s∗ (t))fk (k∗ (t)) − [s∗ (t)fk (k∗ (t)) − µ] = 0 for t ∈ I ,

so

−fk (k∗ (t)) + µ = 0 for t ∈ I ,

or

k∗ (t) = kG for t ∈ I . (8.69)

In turn then we must have k̇∗ (t) = 0 for t ∈ I so that

s∗ (t)f (kG ) − µKG = 0 for t ∈ I ,

and hence,

s∗ (t) = µ f (k
kG
G)
for t ∈ I . (8.70)
116 CHAPTER 8. CONINUOUS-TIME OPTIMAL CONTROL

f µk

f (k)
line of slope µ

k
kG kM

Figure 8.6: Illustration for assumptions (8.62), (8.63).

Thus in the singular case the optimal solution is characterized by (8.69) and (8.70), as in Figure 8.8.

We can now assemble separate cases to obtain the optimal control. First of all, from the final
condition (8.65) we know that for t close to T, p∗ (t) < 1 so that we are in Case 2. We face two
possibilities: Either (A)
p∗ (t) < 1 for all t < [0, T ]
and then s∗ (t) = 0, k∗ (t) = k0 e−µt , for 0 ≤ t ≤ T , or (B)
there exists t2 ∈ (0, T ) such that p∗ (t2 ) = 1 and p∗ (t) < 1 for t2 < t ≤ T .
We then have three possibilities depending on the value of k∗ (t2 ):
(Bi) k∗ (t2 ) < kG : then ṗ∗ (t2 ) < 0 so that p∗ (t) > 1 for t < t2 and we are in Case 1 so that
s∗ (t) = 1 for t < t2 . In particular we must have k0 < kG .
(Bii) k∗ (t2 ) > kG : then ṗ∗ (2 ) > 0 but then p∗ (t2 + ε) > 1 for ε > 0 sufficiently small and since
p∗ (T ) = 0 there must exist t3 ∈ (t2 , T ) such that p∗ (t3 ) = 1. This contradicts the definition of t2
so that this possibility cannot arise.
(Biii) k∗ (t2 ) − kG : then we can have a singular arc in some interval (t1 , t2 ) so that p∗ (t) =
1, k∗ (t) = kG , and s∗ (t) = µ(kG /f (kG )) for t ∈ (t1 , t2 ). For t < t1 we either have p∗ (t) >
1, s∗ (t) > 1 if k0 < kG , or we have p∗ (t) < 1, s∗ (t) = 0 if k > kG .
The various possibilities are illustrated in Figure 8.9.
The capital-to-labor ratio kG is called the golden mean and the singular solution is called the
golden path. The reason for this term is contained in the following exercise.

Exercise 1: A capital-to-labor ratio k̂ is said to be sustainable if there exists ŝ ∈ [0, 1] such that
ŝf (k̂) − µk̂ = 0. Show that kG is the unique sustainable capital-to-labor ratio which maximizes
sustainable consumption (1 − s)f (k).
8.6. BIBLIOGRAPHICAL REMARKS 117

p k

k t
kG

Figure 8.7: Illustration for Case 2.

8.6 Bibliographical Remarks

The results presented in this chapter appeared in English in full detail for the first time in 1962 in the
book by Pontryagin, et al., cited earlier. That book contains many extensions and many examples
and it is still an important source. However, the derivation of the maximum principle given in the
book by Lee and Markus is more satisfactory. Several important generalizations of the maximum
principle have appeared. On the one hand these include extensions to infinite-dimensional state
spaces and on the other hand they allow for constraints on the state more general than merely initial
and final constraints. For a unified, but mathematically difficult, treatment see (Neustadt [1969]).
For a less rigorous treatment of state-space constraints see (Jacobson, et al, [1971]), whereas for a
discussion of the singular case consult (Kelley, et al. [1968]).
For an applications-oriented treatment of this subject the reader is referred to (Athans and Falb
[1966]) and (Bryson and Ho [1969]). For applications of the maximum principle to optimal eco-
nomic growth see (Shell [1967]). There is no single source of computational methods for optimal
control problems. Among the many useful techniques which have been proposed see (Lasdon, et
al., [1967]), (Kelley [1962]), (McReynolds [1966]), and (Balakrishnan and Neustadt [1964]); also
consult (Jacobson and Mayne [1970]), and (Polak [1971]).
118 CHAPTER 8. CONINUOUS-TIME OPTIMAL CONTROL

p k

1 . kG

k t
kG

Figure 8.8: Case 3. The singular case.

8.6. BIBLIOGRAPHICAL REMARKS 119

p∗ p∗
1 1

t t
s∗ T t2 T
s∗
1 1

t t
T t2 T
k∗ k∗

t t
T t2 T
Case (A) Case (Bi)

p∗ p∗
. . . .
t t
t1 t2 T t1 t2 T
s∗ s∗
1
µkG
f (kG )
t t
k∗ k∗
kG . . . .
k0
t t
Case (Biii)

Figure 8.9: The optimal solution of example.

120 CHAPTER 8. CONINUOUS-TIME OPTIMAL CONTROL
Chapter 9

Dynamic programing

SEQUENTIAL DECISION PROBLEMS: DYNAMIC PROGRAMMING FORMULATION

The sequential decision problems discussed in the last three Chapters were analyzed by varia-
tional methods, i.e., the necessary conditions for optimality were obtained by comparing the op-
timal decision with decisions in a small neighborhood of the optimum. Dynamic programming
(DP is a technique which compares the optimal decision with all the other decisions. This global
comparison, therefore, leads to optimality conditions which are sufficient. The main advantage of
DP, besides the fact that it give sufficiency conditions, is that DP permits very general problem for-
mulations which do not require differentiability or convexity conditions or even the restriction to a
finite-dimensional state space. The only disadvantage (which unfortunately often rules out its use)
of DP is that it can easily give rise to enormous computational requirements.
In the first section we develop the main recursion equation of DP for discrete-time problems. The
second section deals with the continuous-time problem. Some general remarks and bibliographical
references are collected in the final section.

9.1 Discrete-time DP
We consider a problem formulation similar to that of Chapter VI. However, for notational conve-
nience we neglect final conditions and state-space constraints.

X
N −1
Maximize f0 (i, x(i), u(i)) + Φ(x(N ))
i=0
subject to (9.1)
dynamics: x(i + 1) = f (i, x(i), u(i)) , i = 0, 1, . . . , N − 1 ,
initial condition: x(0) = x0 ,
control constraint: u(i) ∈ Ωi , i = 0, 1, . . . , N − 1 .

In (9.1), the state x(i) and the control u(i) belong to arbitrary sets X and U respectively. X and U
may be finite sets, or finite-dimensional vector spaces (as in the previous chapters), or even infinite-
dimensional spaces. x0 ∈ X is fixed. The Ωi are fixed subsets of U . Finally f0 (i, ·, ·) : X × U →
R, Φ : X → R, f (i, ·, ·) : X × U → X are fixed functions.

121
122 CHAPTER 9. DYNAMIC PROGRAMING

The main idea underlying DP involves embedding the optimal control problem (9.1), in which
the system starts in state x0 at time 0, into a family of optimal control problems with the same
dynamics, objective function, and control constraint as in (9.1) but with different initial states and
initial times. More precisely, for each x ∈ X and k between ) and N − 1, consider the following
problem:
X
N −1
Maximize f0 (i, x(i), u(i)) + Φ(x(N )) ,
i=k
subject to (9.2)
dynamics: x(i + 1) = f (i, x(i), u(i)), i = k, k + 1, . . . , N − 1,
initial condition: x(k) = x,
control constraint: u(i) ∈ Ωi , i = k, k + 1, ·, N − 1 .
Since the initial time k and initial state x are the only parameters in the problem above, we will
sometimes use the index (9.2)k,x to distinguish between different problems. We begin with an
elementary but crucial observation.
Lemma 1: Suppose u∗ (k), . . . , u∗ (N − 1) is an optimal control for (9.2)k,x , and let x∗ (k) =
x, x∗ (k + 1), . . . , x∗ (N ) be the corresponding optimal trajectory. Then for any `, k ≤ ` ≤ N −
1, u∗ (`), . . . , u∗ (N − 1) is an optimal control for (9.2)`,x∗ (`) .
Proof: Suppose not. Then there exists a control û(`), û(` + 1), . . . , û(N − 1), with corresponding
trajectory x̂(`) = x∗ (`), x̂(` + 1), . . . , x̂(N ), such that

X
N −1
f0 (i, x̂(i), û(i)) + Φ(x̂(N ))
i=` (9.3)
X
N −1
∗ ∗ ∗
> f0 (i, x (i), u (i)) + Φ(x (N )) .
i=`

But then consider the control ũ(k), . . . , ũ(N − 1) with

 ∗
u (i) , i = k, . . . , ` − 1
ũ(i)
û(i) , i = `, . . . , N − 1 ,
and the corresponding trajectory, starting in state x at time k, is x̃(k), . . . , x̃(N ) where
 ∗
x (i) , i = k, . . . , `
x̃(i) =
x̂(i) , i = ` + 1, . . . , N .
The value of the objective function corresponding to this control for the problem (9.2)k,x is

X
N −1
f0 (i, x̃(i), ũ(i)) + Φ(x̃(n))
i=k
X
`−1 X
N −1
= f0 (i, x∗ (i), u∗ (i)) + f0 (i, x̂(i), û(i)) + Φ(x̂(N ))
i=k i=`
X
N −1
> f0 (i, x∗ (i), u∗ (i)) + Φ(x∗ (N )) ,
i=k
9.1. DISCRETE-TIME DP 123

by (9.3), so that u∗ (k), . . . , u∗ (N − 1) cannot be optimal for 9.2)k , x, contradicting the hypothesis.
(end theorem)
From now on we assume that an optimal solution to (9.2)k,x exists for all 0 ≤ k ≤ N − 1, and all
x ∈ X. Let V (k, x) be the maximum value of (9.2)k,x . We call V the (maximum) value function.
Theorem 1: Define V (N, ·) by (V (N, x) = Φ(x). V (k, x) satisfies the backward recursion equa-
tion

V (k, x) = Max{f0 , (k, x, u) + V (k1 , f (k, x, u, ))|u ∈ Ωk }, 0 ≤ k ≤ N − 1 . (9.4)

Proof: Let x ∈ X, let u∗ (k), . . . , u∗ (N − 1) be an optimal control for (9.2)k,x , and let x∗ (k) =
x, . . . , x∗ (N ) be the corresponding trajectory be x(k) = x, . . . , x(N ). We have

X
N −1
f0 (i, x∗ (i), u∗ (i)) + Φ(x∗ (N ))
i=k (9.5)
X
N −1
≥ f0 (i, x(i), u(i)) + Φ(x(N )) .
i=k

By Lemma 1 the left-hand side of (9.5) is equal to

f0 (k, x, u∗ (k)) + V (k + 1, f (k, x∗ , u∗ (k)) .
On the other hand, by the definition of V we have

X
N −1
f0 (i, x(i), u(i)) + Φ(x(N )) = f0 (k, x, u(k))
i=k
XN
+{ f0 (i, x(i), u(i)) + Φ(x(N )) ≤ f0 (k, x, u, (k)) + V (k + 1, f (k, x, u(k))} ,
i=k+1

with equality if and only if u(k + 1), . . . , u(N − 1) is optimal for (9.2)k+1,x(k+1) . Combining these
two facts we get

f0 (k, xu∗ (k)) + V (k + 1, f (k, x, u∗ (k)))

≥ f0 (k, x, u(k)) + V (k + 1, f (x, k, u(k))) ,

for all u(k) ∈ Ωk , which is equivalent to (9.4).(end theorem)

Corollary 1: Let u(k), . . . , u(N − 1) be any control for the problem (9.2)k,x and let x(k) =
x, . . . , x(N ) be the corresponding trajectory. Then
V (`, x(`)) ≤ f0 (`, x(`), u(`)) + V (` + 1, f (`, x(`), u(`)), k ≤ ` ≤ N − 1 ,
and equality holds for all k ≤ ` ≤ N − 1 if and only if the control is optimal for (9.2)k,x .
Corollary 2: For k = 0, 1, . . . , N − 1, let ψ(k, ·) : X → Ωk be such that

f0 (k, x, ψ(k, x)) + V (k + 1, f (k, x, ψ(k, x))

= Max{f0 (k, x, u) + V (k + 1, f (k, x, u))|u ∈ Ωk } .

Then ψ(k, ·), k = 0, . . . , N − 1 is an optimal feedback control, i.e., for any k, x the control
u∗ (k), . . . , u∗ (N − 1) defined by u∗ (`) = ψ(`, x∗ (`)), k ≤ ` ≤ N − 1, where
124 CHAPTER 9. DYNAMIC PROGRAMING

x∗ (` + 1) = f (`, x∗ (`), ψ(`, x∗ (`)), k ≤ ` ≤ N − 1 , x∗ (k) = x ,

is optimal for (α)k,x .

Remark: Theorem 1 and Corollary 2 are the main results of DP. The recursion equation (9.4) al-
lows us to compute the value function, and in evaluating the maximum in (9.4) we also obtain the
optimum feedback control. Note that this feedback control is optimum for all initial conditions.
However, unless we can find a “closed-form” analytic solution to (9.4), the DP formulation may
necessitate a prohibitive amount of computation since we would have to compute and store the val-
ues of V and ψ for all k and x. For instance, suppose n = 10 and the state-space X is a finite set
with 20 elements. Then we have to compute and store 10 × 20 values of V , which is a reasonable
amount. But now suppose X = Rn and we approximate each dimension of x by 20 values. Then
for N = 10, we have to compute and store 10x(20)n values of V . For n = 3 this number is 80,000,
and for n = 5 it is 32,000,000, which is quite impractical for existing computers. This “curse of
dimensionality” seriously limits the applicability of DP to problems where we cannot solve (9.4)
analytically.

• Exercise 1: An instructor is preparing to lead his class for a long hike. He assumes that each
person can take up to W pounds in his knapsack. There are N possible items to choose from.
Each unit of item i weighs wi pounds. The instructor assigns a number Ui > 0 for each
unit of item i. These numbers represent the relative utility of that item during the hike. How
many units of each item should be placed in each knapsack so as to maximize total utility?
Formulate this problem by DP.

9.2 Continuous-time DP
We consider a continuous-time version of (9.2):

Rt
Maximize 0 f f0 (t, x(t), u(t))dt + Φ(x(tf ))
subject to
dynamics: ẋ(t) = f (t, x(t), u(t)) , t0 ≤ t ≤ tf (9.6)
initial condition: x(0) = x0 ,
control constraint: u : [t0 , tf ] → Ω and u(·) piecewise continuous.

In (9.6), x ∈ Rn , u ∈ Rp , Ω ⊂ Rp . Φ : Rn → R is assumed differentiable and f0 , f are assumed

to satisfy the conditions stated in VIII.1.1.
As before, for t0 ≤ t ≤ tf and x ∈ Rn , let V (t, x) be the maximum value of the objective
function over the interval [t, tf ] starting in state x at time t. Then it is easy to see that V must satisfy
Z t+∆
V (t, x) = Max{ f0 (τ, x(τ ), u(τ ))dτ
t (9.7)
+V (t + ∆, x(t + ∆))|u : [t, t + ∆] → Ω}, ∆ ≥ 0 ,

and

V (tf , x) = Φ(x) . (9.8)

9.2. CONTINUOUS-TIME DP 125

In (9.7), x(τ ) is the solution of

ẋ(τ ) = f (τ, x(τ ), u(τ )) , t ≤ τ ≤ t + ∆ ,

x(t) = x .

Let us suppose that V is differentiable in t and x. Then from (9.7) we get

V (t, x) = Max{f0 (t, x, u)∆ + V (t, x) + ∂V

∂x f (t, x, u)∆
+ ∂t (t, x)∆ + o(∆)|u ∈ Ω}, ∆ > 0 .
∂V

Dividing by ∆ > 0 and letting ∆ approach zero we get the Hamilton-Jacobi- Bellman partial
differentiable equation for the value function:
∂V
∂t (t, x) + Max{f0 (t, x, u) + ∂x (t, x)f (t, x, u)|u
∂V
∈ Ω} = 0. (9.9)

Theorem 1: Suppose there exists a differentiable function V : [t0 , tf ] × Rn → R which satisfies

(9.9) and the boundary condition (9.8). Suppose there exists a function ψ : [t0 , tf ] × Rn → Ω
with ψ piecewise continuous in t and Lipschitz in x, satisfying

f0 (t, x, ψ(t, x)) + ∂V

∂x f (t, x, ψ(t, x)) (9.10)
= Max{f0 (t, x, u) + ∂V ∂x f (t, x, u)|u ∈ Ω} .

Then ψ is an optimal feedback control for the problem (9.6), and V is the value function.
Proof: Let t ∈ [t0 , tf ] and x ∈ Rn . Let û : [t, tf ] → Ω be any piecewise continuous control and
let x̂(τ ) be the solution of
·
x̂ (τ ) = f (τ, x̂(τ ), û(τ )) , t ≤ τ ≤ tf , (9.11)
x̂(t) = x .

Let x∗ (τ ) be the solution of

ẋ∗ (τ ) = f (τ, x∗ (τ ), ψ(τ, x∗ (τ ))) , t ≤ τ ≤ tf ,

(9.12)
x∗ (τ ) = x .

Note that the hypothesis concerning ψ guarantees a solution of (9.12). Let u∗ (τ ) = ψ(τ, x∗ , (τ )), t ≤
τ ≤ tf . To show that ψ is an optimal feedback control we must show that
Z tf
f0 (tτ, x∗ (τ ), u∗ (τ ))dτ + Φ(x∗ (τ ))
Z ttf (9.13)
≤ f0 (τ, x∗ (τ ), û(τ ))dτ + Φ(x̂(tf )) .
t

To this end we note that

Z tf
dV
V (tf , x∗ (tf )) − V (t, x∗ (t)) = (τ, x∗ (τ ))dτ
f dτ
tf ∂V ∂V ∗
=∈t { (τ, x∗ (τ ) + ẋ (τ )}dτ (9.14)
Z t∂τ f
∂x
=− F − 0(τ, x∗ (τ ), u∗ (τ ))dτ ,
t
126 CHAPTER 9. DYNAMIC PROGRAMING

using (9.9), (9.10). On the other hand,

Z tf
∂V ∂V ·
V (tf , x̂(tf )) − V (t, x̂, (t)) = {
(τ, x̂(τ )) + x̃ (τ )}dτ
t Z ∂τ ∂x (9.15)
tf
≤− f0 (τ, x̂(τ ), û∗ (τ ))dτ ,
t

using (9.9). From (9.14), (9.15), (9.8) and the fact that x∗ (t) = x̂(t) = x we conclude that
Z tf
V (t, x) = Φ(x∗ (tf )) + f0 (τ, x∗ (τ ), u∗ (τ ))
Z ttf
≥ Φ(x̂(tf )) + f0 (τ, x̂(τ ), û(τ ))dτ
t

so that (9.13) is proved. It also follows that V is the maximum value function. ♦

• Exercise 1: Obtain the value function and the optimal feedback control for the linear regula-
tory problem:
Z
Minimize 12 x0 (T )P (T )x(t) + 12 T0 {x0 (t)P (t)x(t)
+u0 (t)Q(t)u(t)}dt
subject to
dynamics: ẋ(t) = A(t)x(t) + B(t)u(t) , 0 ≤ t ≤ T ,
initial condition: x(0) = x0 ,
control constraint: u(t) ∈ Rp ,

where P (t) = P 0 (t) is positive semi-definite, and Q(t) = Q0 (t) is positive definite. [Hint:
Obtain the partial differential equation satisfied by V (t, x) and try a solution of the form
V (t, x) = x0 R(t)x where R is unknown.]

9.3 Miscellaneous Remarks

There is vast literature dealing with the theory and applications of DP. The most elegant applications
of DP are to various problems in operations research where one can obtain “closed-form” analytic
solutions to be recursion equation for the value function. See (Bellman and Dreyfus [1952]) and
(Wagner [1969]). In the case of sequential decision-making under uncertainties DP is about the
only available general method. For an excellent introduction to this area of application see (Howard
[1960]). For an important application of DP to computational considerations for optimal control
problems see (Jacobson and Mayne [1970]). Larson [1968] has developed computational tech-
niques which greatly increase the range of applicability of DP where closed-form solutions are not
available. Finally, the book of Bellman [1957] is still excellent reading. []
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Index

Active constraint, 50 Duality theorem, 33, 63

Adjoint Equation Dynamic programming, DP
augmented, 98 optimality conditions, 123, 125
continuous-time, 85 problem formulation, 121, 124
Adjoint equation
augmented, 105 Epigraph, 61
continuous-time, 91 Equilibrium of an economy, 45, 64
discrete-time, 80
Farkas’ Lemma, 32
Adjoint network, 23
Feasible direction, 72
Affine function, 54
algorithm, 71
Basic feasible solution, 39 Feasible solution, 33, 49
basic variable, 39
Game theory , 5
Certainty-equivalence principle, 5 Gradient, 8
Complementary slackness, 34
Hamilton-Jacobi-Bellman equation, 125
Constraint qualification
Hamiltonian H,H̃, 78, 99
definition, 53
Hamiltonian HH̃, 101
sufficent conditions, 55
Hypograph, 61
Continuous-time optimal control
necessary condition, 101, 103 Knapsack problem, 124
problem formulation, 101, 103
sufficient condition, 91, 125 Lagrange multipliers, 37
Control of water quality, 67 Lagrangian function, 35
Convex function Langrangian function, 21, 54
definition, 37 Langrangian multipliers, 21
properties, 37, 54, 55 Linear programming, LP
Convex set, 37 duality theorem, 33, 35
problem formulation, 31
Derivative, 8 theory of the firm, 42
Design of resistive network, 15 Linear programming,LP
Discrete-time optimal control optimality condition, 34
necessary condition, 78
problem formulation, 77 Maximum principle
sufficient condition, 123 continuous-time, 86, 91, 101, 103
Discrete-time optimality control discrete-time, 80
sufficient condition, 80 Minimum fuel problem, 81
Dual problem, 33, 58 Minimum-time problem, 107

131
132 INDEX

example, 108 Supergradient, 60

Supporting hyperplane, 61, 84
Non-degeneracy condition, 39
Nonlinear programming, NP Tangent, 50
duality theorem, 63 Transversality condition
necessary condition, 50, 53 continuous-time problem, 91
problem formulation, 49 discrete-time problem, 80
suficient condition, 54
Value function, 123
Optimal decision, 1 Variable final time, 103
Optimal economic growth, 2, 113, 117 Vertex, 38
Optimal feedback control, 123, 125
Optimization over open set Weak duality theorem, 33, 58
necessary condition, 11 Wolfe algorithm, 71
sufficient condition, 13
Optimization under uncertainty, 4
Optimization with equality constraints
necessary condition, 17
sufficient condition, 21
Optimum tax, 70

Primal problem, 33

Quadratic cost, 81, 112

Quadratic programming, QP
optimality condition, 70
problem formulation, 70
Wolfe algorithm, 71

Recursion equation for dynamic programming,

124
Regulator problem, 81, 112
Resource allocation problem, 65

Separation theorem for convex sets, 73

Separation theorem for stochastic control, 5
Shadow prices, 37, 45, 70
Shadow-prices, 39
Simplex algorithm, 37
Phase I, 41
Phase II, 39
Singular case for control, 113
Slack variable, 32
State-space constraint
continuous-time problem, 117
discrete-time problem, 77
Subgradient, 60