Quantitative Analysis for Management Decision

By Yusuf De.(Ass prof)

May 8, 2023
1 ADVANCED TOPICS IN LPP: Duality & Post-optimality

2 Formulation of dual linear programming problem

3 Comparision of Primal and dual

4 FORMULATION OF DUAL LINEAR PROGRAMMING PROBLEM

5 Post-optimality Analysis(Sensitivity Analysis)

By Yusuf De.(Ass prof) () Quantitative Analysis for Management Decision May 8, 2023 2 / 32
Duality

Duality
The term “dual” in a general sense implies two or double.
For every linear programming problem, there is associated another
linear programming problem which is called the dual of the original
(or the primal) problem.
The mirror(or flip flop) image of LPP.
A given LPP has two forms
1 The Primal: the original LP Model
2 The Dual: alternative
For example, consider the problem of production planning.
Primal LP problem - the production manager attempts to optimize
resource allocation by determining quantities for each product to be
produced that will maximize profit.

By Yusuf De.(Ass prof) () Quantitative Analysis for Management Decision May 8, 2023 2 / 32
Duality
Dual LP problem - achieve production plan that optimizes resource
allocation in which its marginal opportunity cost equals to its
marginal return.
The main focus of dual - finding for each resource its best marginal
value or shadow price.
If resource is not completely used, i.e., there is slack, then its
marginal value is zero.
Shadow price - the rate of change in the optimal objective function
value with the respect to the unit change in the availability of a
resource.
Shadow price - represents increase in the objective function value
due to one-unit increase in the right hand side (resource) of any
constraint.
change in the optimal objective function value
Shadow Price =
unit change in the availability of a resource

By Yusuf De.(Ass prof) () Quantitative Analysis for Management Decision May 8, 2023 3 / 32
Comparison of duallity
The dual of a normal Max (canonical form of Max) problem is a
normal Min (canonical form of Min) problem.

By Yusuf De.(Ass prof) () Quantitative Analysis for Management Decision May 8, 2023 4 / 32
Cont...

By Yusuf De.(Ass prof) () Quantitative Analysis for Management Decision May 8, 2023 5 / 32
Example
The primal-Dual Relationship

By Yusuf De.(Ass prof) () Quantitative Analysis for Management Decision May 8, 2023 6 / 32
Formulating the Dual LPP
There are two important forms of primal and dual LP problems,
namely the symmetrical (canonical) form and the standard form.

Symmetrical Form
Suppose the primal LP problem is given in the form
Maximize Zx = c1 x1 + c2 x2 + · · · + cn xn
subject to:
a11 x1 + a12 x2 + · · · + a1n xn ≤ b1
a21 x1 + a22 x2 + · · · + a2n xn ≤ b2
.. ..
. .
am1 x1 + am2 x2 + · · · + amn xn ≤ bm
x1 , x2 , · · · , xn ≥ 0

By Yusuf De.(Ass prof) () Quantitative Analysis for Management Decision May 8, 2023 7 / 32
Cont...
Then the corresponding dual LP problem is written as:
Maximize Zy = b1 y1 + b2 y2 + · · · + bm ym
subject to:
a11 y1 + a21 y2 + · · · + am1 ym ≤ c1
a12 y1 + a22 y2 + · · · + am2 ym ≤ c2
.. ..
. .
a1n y1 + a2n y2 + · · · + amn ym ≤ cn
y1 , y2 , · · · , ym ≥ 0

By Yusuf De.(Ass prof) () Quantitative Analysis for Management Decision May 8, 2023 8 / 32
Cont...
In general, the primal-dual relationship between a pair of LP problems
can be expressed as follows:

By Yusuf De.(Ass prof) () Quantitative Analysis for Management Decision May 8, 2023 9 / 32
Economic Interpretation of Dual Variables
Dual variables:- represent the potential value of resources.
In the maximization primal LP model, we may define each parameter
as follows:
Z = return
cj = profit (or return) per unit of variable (activity) xj
xj = number units of variable j
aij = units of resource, i consumed (required)
bi = maximum units of resource,
i available per unit of variable j

Primal LP Problem
Optimal value of a dual variable associated with a particular primal
constraint indicates the marginal change (increase, if positive or
decrease, if negative) in the optimal value of the primal
objective function.

By Yusuf De.(Ass prof) () Quantitative Analysis for Management Decision May 8, 2023 10 / 32
Cont...
For feasible solutions of both primal and dual LP problems, objective
function value satisfy the inequality Zx ≤ Zy .
This inequality is interpreted as: Profit ≤ Worth of resources.

Example
A firm manufactures two products A and B on machines I and II as shown
below:

The total time available is 300 hours and 110 hours on machines I and II,
respectively. Products A and B contribute a profit of 6 Birr and 8 Birr per
unit, respectively. Determine the optimum product mix.
By Yusuf De.(Ass prof) () Quantitative Analysis for Management Decision May 8, 2023 11 / 32
Cont...
Write the dual of this LP problem and give its economic interpretation.
Mathematical formulation The primal and the dual LP problems of
the given problem are:

By Yusuf De.(Ass prof) () Quantitative Analysis for Management Decision May 8, 2023 12 / 32
Solution of the primal problem
The optimal solution of the primal problem by using simplex method is
given in the table

The above table indicates that the optimal solution is to produce:

x1 = 4 units of product A; x2 = 9 units of product B and Zx = total
maximum profit, Birr 96.

By Yusuf De.(Ass prof) () Quantitative Analysis for Management Decision May 8, 2023 13 / 32
Solution of the dual problem
The optimal solution of the dual problem can be obtained by applying the
Big-M method. The optimal solution is shown in table below:

The optimal solution as given in the above table is: y1 = 1/10 Birr per
hour on machine I; y2 = 6/10 Birr per hour on machine II and Zy = total
minimum cost, Birr 96.
The values of y1 = 1/10Birr and y2 = 3/5 Birr, indicate the worth of one
hour of machine time of machines I and II, respectively. However, since
the machines hours can be increased beyond a specific limit, this result
holds true only for a specific range of hours available on machines I and II.
By Yusuf De.(Ass prof) () Quantitative Analysis for Management Decision May 8, 2023 14 / 32
ADVANTAGES OF DUALITY
1 It is advantageous to solve the dual of a primal that has a less
number of constraints because the number of constraints usually
equals the number of iterations required to solve the problem.
2 This avoids the necessity for adding surplus or artificial variables and
solves the problem quickly.
3 The dual variables provide an important economic interpretation of
the final solution of an LP problem.
4 It is quite useful when investigating changes in the parameters of an
LP problem (the technique is known as the sensitivity analysis).
5 Duality is used to solve an LP problem by the simplex method in
which the initial solution is infeasible (the technique is known as the
dual simplex method).

By Yusuf De.(Ass prof) () Quantitative Analysis for Management Decision May 8, 2023 15 / 32
Sensitivity Analysis
Sensitivity analysis is analysis of the parameter changes and their
effects on the model solution.
That means, change of coefficient of the constraints, change of
coefficient of the objective function, change of quantity or RHS values
The sensitivity analysis is also referred to as post-optimality analysis
because it does not begin until the optimal solution to the given LP
model has been obtained.
sensitivity analysis identify the magnitude of change in the optimal
solution of an LP model due to discrete variations (changes) in its
parameters.
Starts with the final tableau of the LPP (simplex tableau)

By Yusuf De.(Ass prof) () Quantitative Analysis for Management Decision May 8, 2023 16 / 32
Cont...
Parametric analysis helps in evaluating the effect on optimal solution
of any LP problem due to changes in its parameter, simultaneously as
a function of one parameter.
Different parametric changes in an LP problem discussed in this
section are:
1 Profit (or cost) per unit (cj ) associated with both basic and non-basic
decision variables (i.e., coefficients in the objective function).
2 Availability of resources
(i.e., right-hand side constants, bi in constraints).
3 Consumption of resources per unit of decision variables xj
(i.e., coefficients of decision variables in the constraints, aij ).
4 Addition of a new variable to the existing list of variables in LP
problem.
5 Addition of a new constraint to the existing list of constraints in the LP
problem.

By Yusuf De.(Ass prof) () Quantitative Analysis for Management Decision May 8, 2023 17 / 32
Cont...
Range of optimality is where the coefficient of any basic variable
can change without causing change in the optimal solution mix

Example
A company wants to produce three products: A, B and C. The per unit
profit on these products is Birr 4, Birr 6 and Birr 2, respectively. These
products require two types of resources, manpower and raw material. The
LP model formulated for determining the optimal product mix is as follows:
Solution: The required LPP is:
Maximize Z = 4x1 + 6x2 + 2x3
subject to:
x1 + x2 + x3 ≤ 3 (Manpower required)
x1 + 4x2 + 7x3 ≤ 9 (Raw material available)
and
x1 , x2 , x3 ≥ 0

By Yusuf De.(Ass prof) () Quantitative Analysis for Management Decision May 8, 2023 18 / 32
Cont...
where
x1 = number of units of products A to be produced.
x2 = number of units of products B to be produced.
x3 = number of units of products C to be produced.
(a) Find the optimal product mix and the corresponding profit of the
company.
(b) Find the range of the profit contribution of product C
(i.e. coefficient c3 of variable x3 ) in the objective function, such that
the current optimal product mix remains unchanged.
(c) What shall be the new optimal product mix when per unit profit from
product C is increased from Birr 2 to Birr 10?
(d) Find the range of the profit contribution of product A
(i.e. coefficient c1 of variable x1 ) in the objective function such that
the current optimal product mix remains unchanged.

By Yusuf De.(Ass prof) () Quantitative Analysis for Management Decision May 8, 2023 19 / 32
Cont..
(a) Introducing the slack variables s1 and s2 in the constraints to convert
LP problem into its standard form as follows:
Maximize Z = 4x1 + 6x2 + 2x3 + 0s1 + 0s1
subject to:
x1 + x2 + x3 + s1 = 3
x1 + 4x2 + 7x3 + s2 = 9
and
x1 , x2 , x3 , s1 , s2 ≥ 0
The optimal solution obtained by applying the simplex method is:

The optimal solution is: x1 = 1, x2 = 2 and Max Z = 16 Birr.

By Yusuf De.(Ass prof) () Quantitative Analysis for Management Decision May 8, 2023 20 / 32
Cont...
(b) Effect of change in the coefficient c3 of non-basic variable x3 for
product C :
In the above table, the variable x3 is non-basic and its coefficient
c3 = 2 is not listed in the cB column of the table.
This means a further decrease in its profit contribution c3 (= Birr 2)
per unit will have no effect on the current optimal product mix.
But, if c3 is increased beyond a certain value, the product may
become profitable to be produced.
Hence, there is only an upper limit on c3 for which the current
optimal product mix will be effected.

By Yusuf De.(Ass prof) () Quantitative Analysis for Management Decision May 8, 2023 21 / 32
Table with a ∆c3 change in c3

Now a change ∆c3 in c3 will cause a change in z3 and c3 − z3 value

in the x3 -column.
The change in c3 results in the modified simplex table above.
For an optimal solution shown in the table above to remain
unchanged, we must have: ∆c3 − 6 ≤ 0 or ∆c3 ≤ 6.

By Yusuf De.(Ass prof) () Quantitative Analysis for Management Decision May 8, 2023 22 / 32
Cont...
Recalling that c3 = 2 + ∆c3 , or ∆c3 = c3 − 2, after substituting this
amount in the above inequality, we get c3 − 2 ≤ 6 or c3 ≤ 8.
This implies that as long as the profit contribution per unit of product
C is less than Birr 8 (i.e. change should not be more than Birr 8) it is
not profitable to produce it and therefore the current optimal solution
will remain unchanged.
(c) If the value of c3 is increased from Birr 2 to Birr 10, the new
value of c3 − z3 will be: " #
−1
c3 − z3 = c3 − cB a3 = 10 − [4 6] = 10 − (−4 + 12) = 2(≥ 0)
2
Thus, if coefficient of variable x3 is increased from Birr 2 to Birr 10,
the value of c3 − z3 will become positive as shown in the table below.
The variable x3 (corresponding to product C ) becomes eligible to
enter into the basis.
Hence, the solution cannot remain optimal any more.

By Yusuf De.(Ass prof) () Quantitative Analysis for Management Decision May 8, 2023 23 / 32
The new optimal solution is shown in table
Applying the following row operations to enter variable x3 into the new
solution mix
R2 (new)=⇒ R2 (old)/2 (key element)
and
R1 (new) =⇒ R1 (old) + R2 (new)

Since all cj − zj ≤ 0 in table above, the new optimal solution is:

x1 = 2, x2 = 0 and x3 = 1 and Max Z = Birr 18.

By Yusuf De.(Ass prof) () Quantitative Analysis for Management Decision May 8, 2023 24 / 32
Cont...
(d) Effect of change in the coefficient c1 of basic variable x1 for
product A:
In the optimal simplex table, variable x1 is the basic variable.
This means that any decrease in its coefficient (profit contribution per
unit) c1 (= Birr 4) will make product A less profitable to produce and
therefore the current optimal product mix will be affected.
Also, an increase in the value of c1 , beyond a certain limit, will make
the product A much more profitable and may force the decision-maker
to decide to only produce product A.
Thus, in either case, the current optimal product mix will be affected
and hence we need to know both the lower and upper limit on the
value of c1 , within which the current optimal solution will remain
unchanged.

By Yusuf De.(Ass prof) () Quantitative Analysis for Management Decision May 8, 2023 25 / 32
A Change ∆c1 in Coefficient c1
Referring again to optimal simplex table, the range of change in the
value of c1 (and/or also in c2 ) that does not affect the current
optimal product mix can be determined once again by calculating
cj − zj , values that correspond to non-basic variables x3 , s1 and s2
respectively.
For this reproduce optimal simplex table once again with unknown
value of c1 as shown in table below.

By Yusuf De.(Ass prof) () Quantitative Analysis for Management Decision May 8, 2023 26 / 32
Cont...
For the solution shown in the above table to remain optimal we must
have all cj − zj ≤ 0.
That is
∆c1 − 6 ≤ 0, gives ∆c1 ≤ 6
10 4∆c1 5
− − ≤ 0, gives ∆c1 ≥ −
3 3 2
∆c1 2
− ≤ 0, gives ∆c1 ≤ 2
3 3
Thus, the range of values within which c1 may change without
affecting the current optimal solution is:
5
− ≤ ∆c1 ≤ 2
2
or
5
4− ≤ c1 ≤ 4 + 2
2
By Yusuf De.(Ass prof) () Quantitative Analysis for Management Decision May 8, 2023 27 / 32
Cont...
3
≤ c1 ≤ 6
2

From these calculations, it may be concluded that in the case of

competitive pressure or in the absence of any competition, the
decision-maker knows to what extent the prices can be adjusted
without changing the optimal product mix.

By Yusuf De.(Ass prof) () Quantitative Analysis for Management Decision May 8, 2023 28 / 32
CHAPTER CONCEPTS QUIZ
True or False
1. The solution to the dual yields shadow prices.
2. The absolute values of the numbers in the cj − zj row under the
slack variables represent the solutions to the dual problem.
3. The transpose of the primal constraints coefficients become the dual
constraint coefficients.
4. The range over which shadow prices remain valid is called
righthand-side ranging.
5. The dual of dual is a primal problem.
6. A variable which is in the solution of a linear programming problem
is called basic variable.
7. The cj − zj values in the non-basic slack variable columns is equal
to the value of the basic variable.

By Yusuf De.(Ass prof) () Quantitative Analysis for Management Decision May 8, 2023 29 / 32
1. The right-hand side constant of a constraint in a primal problem
appears in the corresponding dual as
(a) a coefficient in the objective function
(b) a right-hand side constant of a constraint
(c) an input-out coefficient
(d) none of the above
2. Dual LP problem approach attempts to optimize resource allocation by
ensuring that
(a) marginal opportunity cost of a resource equals its marginal return
(b) marginal opportunity cost of a resource is less than its marginal
return
(c) both (a) and (b)
(d) none of the above
3. Shadow price indicates how much one unit change in the resource value
will change the
(a) optimality range of an objective function
(b) optimal value of the objective function
(c) value of the basic variable in the optimal solution
(d) none of the above
By Yusuf De.(Ass prof) () Quantitative Analysis for Management Decision May 8, 2023 30 / 32
Cont...
4. Sensitivity analysis
(a) is also called post-optimality analysis as it is carried out after
the optimal solution is obtained
(b) allows the decision-maker to get more meaningful information
about changes in the LP model parameters
(c) provides the range within which a parameter may change
without affecting optimality
(d) all of the above
5. A change in the objective function for a non-basic variable can affect
(a) cj − zj values of all non-basic variables
(b) cj − zj values of all basic variables
(c) Only the cj − zj value of that variable
(d) none of the above

By Yusuf De.(Ass prof) () Quantitative Analysis for Management Decision May 8, 2023 31 / 32
 Any questions?

End of Chapter Three

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