Khaled Rageh Grade Four OR Ch 3

Linear Programming: Sensitivity Analysis and Interpretation of Solution

• Introduction to Sensitivity Analysis
• Graphical Sensitivity Analysis
• Sensitivity Analysis: Computer Solution
• Simultaneous Changes

Standard Computer Output

Software packages such as The Management Scientist and Microsoft Excel provide the following LP information:
• Information about the objective function:
✓ its optimal value
✓ coefficient ranges (ranges of optimality)

• Information about the decision variables:

✓ their optimal values
✓ their reduced costs

• Information about the constraints:

✓ the amount of slack or surplus
✓ the dual prices
✓ right-hand side ranges (ranges of feasibility)

• In Chapter 2 we discussed:
✓ objective function value
✓ values of the decision variables
✓ reduced costs
✓ slack/surplus

• In this chapter we will discuss:

✓ changes in the coefficients of the objective function
✓ changes in the right-hand side value of a constraint

Sensitivity Analysis

• Sensitivity analysis (or post-optimality analysis) is used to determine how the optimal solution is affected
by changes, within specified ranges, in:
✓ the objective function coefficients
✓ the right-hand side (RHS) values

• Sensitivity analysis is important to the manager who must operate in a dynamic environment with imprecise
estimates of the coefficients.
• Sensitivity analysis allows him to ask certain what-if questions about the problem.

Example 1 – According to Ch. 2 Page 5:

• LP Formulation

Max 5x1 + 7x2

s.t. x1 ≤ 6
2x1 + 3x2 ≤ 19
x1 + x2 ≤ 8
x1, x2 ≥ 0
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• Graphical Solution

Objective Function Coefficients

• Let us consider how changes in the objective function coefficients might affect the optimal solution.
• The range of optimality for each coefficient provides the range of values over which the current solution will
remain optimal.
• Managers should focus on those objective coefficients that have a narrow range of optimality and coefficients
near the endpoints of the range.

Example

• Changing Slope of Objective Function

Range of Optimality

Graphically, the limits of a range of optimality are found by changing the slope of the objective function line within
the limits of the slopes of the binding constraint lines.

The slope of an objective function line, Max c1x1 + c2x2, is -c1/c2,

and the slope of a constraint, a1x1 + a2x2 = b, is ― a1/a2.

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Example:

• Range of Optimality for c1

The slope of the objective function line is - c1/c2.

The slope of the first binding constraint, x1 + x2 = 8, is -1
and the slope of the second binding constraint, 2x1 + 3x2 = 19, is -2/3.

Find the range of values for c1 (with c2 staying 7) such that the objective function line slope lies between that of the
two binding constraints:
-1 ≤ -C1/7 ≤ -2/3

Multiplying through by -7 (and reversing the inequalities):

14/3 ≤ C1 ≤ 7
4.66 ≤ C1 ≤ 7
5 given

• Range of Optimality for c2

Find the range of values for c2 ( with c1 staying 5) such that the objective function line slope lies between that of
the two binding constraints:

-1 ≤ -5/C2 ≤ -2/3

Multiplying by -1: 1 ≥ 5/C2 ≥ 2/3

Inverting, 1 ≤ C2/5 ≤ 3/2

Multiplying by 5:
5 ≤ C2 ≤ 15/2
5 ≤ C2 ≤ 15/2
7 given

• Range of Optimality for c1 and c2

Adjustable Cells
Final Reduced Objective Allowable Allowable
Cell Name Value Cost Coefficient Increase Decrease
$B$8 X1 5.0 0.0 5 2 0.3333333
$C$8 X2 3.0 0.0 7 0.5 2

Range of Feasibility

Right-Hand Sides

• Let us consider how a change in the right-hand side for a constraint might affect the feasible region and
perhaps cause a change in the optimal solution.
• The improvement in the value of the optimal solution per unit increase in the right-hand side is called the
dual price.
• The range of feasibility is the range over which the dual price is applicable.

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• As the RHS increases, other constraints will become binding and limit the change in the value of the objective
function.

Dual Price

• Graphically, a dual price is determined by adding +1 to the right hand side value in question and then
resolving for the optimal solution in terms of the same two binding constraints.
• The dual price is equal to the difference in the values of the objective functions between the new and original
problems.
• The dual price for a nonbinding constraint is 0.
• A negative dual price indicates that the objective function will not improve if the RHS is increased.

Relevant Cost and Sunk Cost

• A resource cost is a relevant cost if the amount paid for it is dependent upon the amount of the resource used
by the decision variables.
• Relevant costs are reflected in the objective function coefficients.
• A resource cost is a sunk cost if it must be paid regardless of the amount of the resource actually used by the
decision variables.
• Sunk resource costs are not reflected in the objective function coefficients.

A Cautionary Note on the Interpretation of Dual Prices

• Resource cost is sunk

The dual price is the maximum amount you should be willing to pay for one additional unit of the resource.

• Resource cost is relevant

The dual price is the maximum premium over the normal cost that you should be willing to pay for one unit of
the resource.

Example:

Dual Prices

Constraint 1:

Since x1 < 6 is not a binding constraint, its dual price is 0.

Constraint 2:

Change the RHS value of the second constraint to 20 and resolve for the optimal point determined by the last two
constraints:

2x1 + 3x2 = 20 and x1 + x2 = 8.

The solution is x1 = 4, x2 = 4, z = 48. Hence, the dual price = znew - zold = 48 - 46 = 2.

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Khaled Rageh Grade Four OR Ch 3
Constraint 3:

Change the RHS value of the third constraint to 9 and resolve for the optimal point determined by the last two
constraints: 2x1 + 3x2 = 19 and x1 + x2 = 9.

The solution is: x1 = 8, x2 = 1, z = 47.

The dual price is znew - zold = 47 - 46 = 1.

Constraints

Final Shadow Constraint R.H. Allowable Allowable

Cell Name Value Price Side Increase Decrease
$B$13 #1 5 0 6 1.E+30 1
$B$14 #2 19 2 19 5 1
$B$15 #3 8 1 8 0.3333333 1.6666667

• The range of feasibility for a change in the right hand side value is the range of values for this coefficient in
which the original dual price remains constant.

• Graphically, the range of feasibility is determined by finding the values of a right hand side coefficient such
that the same two lines that determined the original optimal solution continue to determine the optimal
solution for the problem.

Adjustable Cells

Final Reduced Objective Allowable Allowable

Cell Name Value Cost Coefficient Increase Decrease
$B$8 X1 5.0 0.0 5 2 0.3333333
$C$8 X2 3.0 0.0 7 0.5 2

Constraints
Final Shadow Constraint R.H. Allowable Allowable
Cell Name Value Price Side Increase Decrease
$B$13 #1 5 0 6 1.E+30 1
$B$14 #2 19 2 19 5 1
$B$15 #3 8 1 8 0.3333333 1.6666667

Example 2: Olympic Bike Co.

Olympic Bike is introducing two new lightweight bicycle frames, the Deluxe and the Professional, to be made from
special aluminum and steel alloys. The anticipated unit profits are $10 for the Deluxe and $15 for the Professional.
The number of pounds of each alloy needed per frame is summarized below. A supplier delivers 100 pounds of the
aluminum alloy and 80 pounds of the steel alloy weekly.

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Khaled Rageh Grade Four OR Ch 3
Aluminum Alloy Steel Alloy
Deluxe 2 3
Professional 4 2

How many Deluxe and Professional frames should Olympic produce each week?

Model Formulation

• Verbal Statement of the Objective Function

Maximize total weekly profit.

• Verbal Statement of the Constraints

Total weekly usage of aluminum alloy ≤ 100 pounds.
Total weekly usage of steel alloy ≤ 80 pounds.

• Definition of the Decision Variables

x1 = number of Deluxe frames produced weekly.
x2 = number of Professional frames produced weekly.

Max 10x1 + 15x2 (Total Weekly Profit)

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

3x1 + 2x2 ≤ 80 (Steel Available)
x1, x2 ≥ 0

Partial Spreadsheet Showing Problem Data

Partial Spreadsheet Showing Solution

Optimal Solution
According to the output:
x1 (Deluxe frames) = 15
x2 (Professional frames) = 17.5
Objective function value = $412.50

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Range of Optimality

Question 1:

Suppose the profit on deluxe frames is increased to $20. Is the above solution still optimal? What is the value of the
objective function when this unit profit is increased to $20?

Sensitivity Report

Adjustable Cells
Final Reduced Objective Allowable Allowable
Cell Name Value Cost Coefficient Increase Decrease
$B$8 Deluxe 15 0 10 12.5 2.5
$C$8 Profess. 17.500 0.000 15 5 8.3333333

Constraints
Final Shadow Constraint R.H. Allowable Allowable
Cell Name Value Price Side Increase Decrease
$B$13 Aluminum 100 3.125 100 60 46.6666667
$B$14 Steel 80 1.25 80 70 30

Answer
The output states that the solution remains optimal as long as the objective function coefficient of x1 is between 7.5
and 22.5. Since 20 is within this range, the optimal solution will not change. The optimal profit will change: 20x1 +
15x2 = 20(15) + 15(17.5) = $562.50.

Question 2:
If the unit profit on deluxe frames were $6 instead of $10, would the optimal solution change?

Adjustable Cells
Final Reduced Objective Allowable Allowable
Cell Name Value Cost Coefficient Increase Decrease
$B$8 Deluxe 15 0 10 12.5 2.5
$C$8 Profess. 17.500 0.000 15 5 8.3333333

Constraints
Final Shadow Constraint R.H. Allowable Allowable
Cell Name Value Price Side Increase Decrease
$B$13 Aluminum 100 3.125 100 60 46.6666667
$B$14 Steel 80 1.25 80 70 30

Answer
The output states that the solution remains optimal as long as the objective function coefficient of x1 is between 7.5
and 22.5. Since 6 is outside this range, the optimal solution would change.

Simultaneous Changes

• Range of Optimality and 100% Rule

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The 100% rule states that simultaneous changes in objective function coefficients will not change the optimal
solution as long as the sum of the percentages of change divided by the corresponding maximum allowable change
in the range of optimality for each coefficient does not exceed 100%.

Question 3:

If simultaneously the profit on Deluxe frames was raised to $16 and the profit on Professional frames was raised to
$17, would the current solution be optimal

Answer:

If c1 = 16, the amount c1 changed is 16 - 10 = 6 .

The maximum allowable increase is 22.5 - 10 = 12.5, so this is a 6/12.5 = 48% change. If c2 = 17, the amount that
c2 changed is 17 - 15 = 2. The maximum allowable increase is 20 - 15 = 5 so this is a 2/5 = 40% change. The sum
of the change percentages is 88%.

Since this does not exceed 100%, the optimal solution would not change.

Range of Feasibility and 100% Rule

The 100% rule states that simultaneous changes in right-hand sides will not change the dual prices as long as the
sum of the percentages of the changes divided by the corresponding maximum allowable change in the range of
feasibility for each right-hand side does not exceed 100%.

Range of Feasibility and Sunk Costs

Question 4:

Given that aluminum is a sunk cost, what is the maximum amount the company should pay for 50 extra pounds of
aluminum?

Adjustable Cells
Final Reduced Objective Allowable Allowable
Cell Name Value Cost Coefficient Increase Decrease
$B$8 Deluxe 15 0 10 12.5 2.5
$C$8 Profess. 17.500 0.000 15 5 8.3333333

Constraints
Final Shadow Constraint R.H. Allowable Allowable
Cell Name Value Price Side Increase Decrease
$B$13 Aluminum 100 3.125 100 60 46.6666667
$B$14 Steel 80 1.25 80 70 30

Answer

Since the cost for aluminum is a sunk cost, the shadow price provides the value of extra aluminum.
The shadow price for aluminum is the same as its dual price (for a maximization problem). The shadow price for
aluminum is $3.125 per pound and the maximum allowable increase is 60 pounds. Since 50 is in this range, then
the $3.125 is valid. Thus, the value of 50 additional pounds is = 50($3.125) = $156.25.

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Range of Feasibility and Relevant Costs

Question 5:
If aluminum were a relevant cost, what is the maximum amount the company should pay for 50 extra pounds of
aluminum?

Answer
If aluminum were a relevant cost, the shadow price would be the amount above the normal price of aluminum the
company would be willing to pay. Thus if initially aluminum cost $4 per pound, then additional units in the range of
feasibility would be worth $4 + $3.125 = $7.125 per pound.

Example 3

Consider the following linear program:

Min 6x1 + 9x2 ($ cost)

s.t. x1 + 2x2 ≤8
10x1 + 7.5x2 ≥ 30
x2 ≥2
x1, x2 ≥0

The Management Scientist Output

OBJECTIVE FUNCTION VALUE = 27.000

Variable Value Reduced Cost

x1 1.500 0.000
x2 2.000 0.000

Constraint Slack/Surplus Dual Price

1 2.500 0.000
2 0.000 -0.600
3 0.000 -4.500

OBJECTIVE COEFFICIENT RANGES

Variable Lower Limit Current Value Upper Limit

x1 0.000 6.000 12.000
x2 4.500 9.000 No Limit

RIGHTHAND SIDE RANGES

Constraint Lower Limit Current Value Upper Limit

1 5.500 8.000 No Limit
2 15.000 30.000 55.000
3 0.000 2.000 4.000

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Optimal Solution

According to the output:

x1 = 1.5
x2 = 2.0
Objective function value = 27.00

Range of Optimality

Question 1:

Suppose the unit cost of x1 is decreased to $4. Is the current solution still optimal? What is the value of the
objective function when this unit cost is decreased to $4?

The Management Scientist Output

Objective Coefficient Ranges

Variable Lower Limit Current Value Upper Limit

X1 0.000 6.000 12.000
X2 4.500 9.000 No Limit

Answer
The output states that the solution remains optimal as long as the objective function coefficient of x1 is between 0
and 12. Since 4 is within this range, the optimal solution will not change. However, the optimal total cost will be
affected: 6x1 + 9x2 = 4(1.5) + 9(2.0) = $24.00.

Question 2:
How much can the unit cost of x2 be decreased without concern for the optimal solution changing?

The Management Scientist Output

Objective Coefficient Ranges

Variable Lower Limit Current Value Upper Limit

X1 0.000 6.000 12.000
X2 4.500 9.000 No Limit

Answer
The output states that the solution remains optimal as long as the objective function coefficient of x2 does not fall
below 4.5.

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Range of Optimality and 100% Rule

Question 3:
If simultaneously the cost of x1 was raised to $7.5 and the cost of x2 was reduced to $6, would the current solution
remain optimal?

Answer:
If c1 = 7.5, the amount c1 changed is 7.5 - 6 = 1.5.

The maximum allowable increase is 12 - 6 = 6, so this is a 1.5/6 = 25% change. If c2 = 6, the amount that c2
changed is 9 - 6 = 3. The maximum allowable decrease is 9 - 4.5 = 4.5, so this is a 3/4.5 = 66.7% change.

The sum of the change percentages is 25% + 66.7% = 91.7%. Because this does not exceed 100%, the optimal
solution would not change.

Range of Feasibility

Question 4:

If the right-hand side of constraint 3 is increased by 1, what will be the effect on the optimal solution?

The Management Scientist Output

Objective Coefficient Ranges

Variable Lower Limit Current Value Upper Limit

X1 0.000 6.000 12.000
X2 4.500 9.000 No Limit

Right Hand Side Ranges

Constraint Lower Limit Current Value Upper Limit

1 5.500 8.000 No Limit
2 15.000 30.000 55.000
3 0.000 2.000 4.000

Answer
A dual price represents the improvement in the objective function value per unit increase in the right-hand side. A
negative dual price indicates a deterioration (negative improvement) in the objective, which in this problem means
an increase in total cost because we're minimizing. Since the right-hand side remains within the range of feasibility,
there is no change in the optimal solution. However, the objective function value increases by $4.50.

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Example:

Use the following Management Scientist output to answer the questions:

Linear Programming Problem

Max 31 X1 + 35 X2 + 32 X3

S.T.
1) 3 X1 + 5 X2 + 2 X3 > 90
2) 6 X1 + 7 X2 + 8 X3 < 150
3) 5 X1 + 3 X2 + 3 X3 < 120

Optimal Solution

Objective Function Value = 763.333

Variable Value Reduced Costs

X1 13.333 0.000
X2 10.000 0.000
X3 0.000 10.889

Constraint Slack/Surplus Dual Prices

1 0.000 -0.778
2 0.000 5.556
3 23.333 0.000

Objective Coefficient Ranges

Variable Lower Limit Current Value Upper Limit

X1 30.000 31.000 No Upper Limit
X2 No Lower Limit 35.000 36.167
X3 No Lower Limit 32.000 42.889

Right Hand Side Ranges

Constraint Lower Limit Current Value Upper Limit

X1 77.647 90.000 107.143
X2 126.000 150.000 163.125
X3 96.667 120.000 No Upper Limit

Required:
a) Give solution to the problem.
b) Which constrains are binding?
c) What would happen if the coefficient of X1 increased by 3 ?
d) What would happen if the right-hand side of constraint 1 increased by 10 ?
Sol:
a. X1 = 13.33
X2 = 10
X3 = 0
S1 = 0
S2 = 0
S3 = 23.33
Z = 763.33

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Khaled Rageh Grade Four OR Ch 3
b. Constraints 1 and 2 are binding.

c. The value of the objective function would increase by 40

= value of variable X amount of increase coefficient
= 13.333 X 3 = 40

d. The value of the objective function would decrease by 7.78

= amount of increase X dual price
= 10 X -0.778 = -7.78

Example:

Use the following Management Scientist output to answer the questions:

Min 4X1 + 5X2 + 6X3

S.T.
1) X1 + X2 + X3 < 85
2) 3X1 + 4X2 + 2X3 > 280
3) 2X1 + 4X2 + 4X3 > 320

Optimal Solution

Objective Function Value = 400.000

Variable Value Reduced Costs

X1 0.000 1.500
X2 80.000 0.000
X3 0.000 1.000

Constraint Slack/Surplus Dual Prices

1 5.000 0.000
2 40.000 0.000
3 0.000 -1.250

Objective Coefficient Ranges

Variable Lower Limit Current Value Upper Limit

X1 2.500 4.000 No Upper Limit
X2 0.000 5.000 6.000
X3 5.000 6.000 No Upper Limit

Right Hand Side Ranges

Constraint Lower Limit Current Value Upper Limit

X1 80.000 85.000 No Upper Limit
X2 No Upper Limit 280.000 320.000
X3 280.000 320.000 340.000

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Required:
a) What is the optimal solution, and what is the value of the profit contribution?
b) Which constrains are binding?
c) What are the dual prices for each resource? Interpret.
d) Compute and interpret the ranges of optimality.
e) Compute and interpret the ranges of feasibility.

Sol:
a. X1 = 0
X2 = 80
X3 = 0
S1 = 5
S2 = 40
S3 = 0
Z = 400

b. Constraint 3 is binding.

c. Dual prices are 0, 0, and -1.25.

They measure the improvement in Z per unit increase in each right-hand side.

d. 2.5 ≤ C1 < ∞
0 ≤ C2 ≤ 6
5 ≤ C3 < ∞

As long as the objective function coefficient stays within its range, the current optimal solution point will not
change, although Z could.

e. 80 ≤ b1 < ∞
-∞ < b2 ≤ 320
280 ≤ b3 ≤ 340

As long as the right-hand side value stays within its range, the currently binding constraints will remain so,
although the values of the decision variables could change. The dual variable values will remain the same.

Example:

Use the following Management Scientist output to answer the questions:

Linear Programming Problem

Max 25 X1 + 30 X2 + 15 X3

S.T.
1) 4 X1 + 5 X2 + 8 X3 < 1200
2) 9 X1 + 15 X2 + 3 X3 < 1500

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Optimal Solution

Objective Function Value = 4700.000

Variable Value Reduced Costs

X1 140.000 0.000
X2 0.000 10.000
X3 80.000 0.000

Constraint Slack/Surplus Dual Prices

1 0.000 1.000
2 0.000 2.000

Objective Coefficient Ranges

Variable Lower Limit Current Value Upper Limit

X1 19.286 25.000 45.000
X2 No Upper Limit 30.000 40.000
X3 8.333 15.000 50.000

Right Hand Side Ranges

Constraint Lower Limit Current Value Upper Limit

X1 666.667 1200.000 4000.000
X2 450.000 1500.000 2700.000
Required:
a. Give the complete optimal solution.
b. Which constraints are binding?
c. What is the dual price for the second constraint?
What interpretation does this have?
d. Over what range can the objective function coefficient of X2 vary before a new solution point becomes
optimal?
e. By how much can the amount of resource 2 decrease before the dual price will change?
f. What would happen if the first constraint's right-hand side increased by 700 and the second's decreased by
350?
Sol:
a. X1 = 140
X2 = 0
X3 = 80
S1 = 0
S2 = 0
Z = 4700

b. Constraint 1 and 2 are binding.

c. Dual price 2 = 2.33. A unit increase in the right-hand side of constraint 2 will increase the value of the
objective function by 2.33.

d. As long as C2 ≤ 40 , the solution will be unchanged.

e. 1050

f. The sum of percentage changes is 700/2800 + (-350) / (-1050) < 1

So the solution will not change.

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