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Concave Programming

University Mathematics is 100% positioned to meet the demands of undergraduate, postgraduate and professional exams. The book is capable and remarkable, giving students a good grounding in real-world mathematical applications. Inside you will find: • Simplified explanations step by step. • Solved examples of varying difficulties. • Plenty of workouts, fill-in-the-blanks and multiple-choice questions. Every student and every classroom will vastly benefit from University Mathematics.

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8 views

Concave Programming

University Mathematics is 100% positioned to meet the demands of undergraduate, postgraduate and professional exams. The book is capable and remarkable, giving students a good grounding in real-world mathematical applications. Inside you will find: • Simplified explanations step by step. • Solved examples of varying difficulties. • Plenty of workouts, fill-in-the-blanks and multiple-choice questions. Every student and every classroom will vastly benefit from University Mathematics.

Uploaded by

Olaniyi Evans
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20

N ON - LINEAR P ROGRAMMING
AND E NVELOPE T HEOREM

CONTENTS
Concave programming 264
Karush-Kuhn-Tucker (KKT) conditions 264
The envelope theorem 271
Utility maximization: Roy’s identity 271
Cost minimization: Shephard’s lemma 272
The Lagrange multiplier as shadow value 273

Nonlinear programming is the optimization of a nonlinear objective function


subject to constraints, which can include linear constraints, or nonlinear
constraints. Non-linear programming extends the techniques of constrained
optimization by allowing inequality constraints into the problem, especially
constraints that may not be binding in the solution.

C O NC A VE PR O G R A M M I NG
Concave programming refers to a type of optimization problem where the
objective function is a concave function and the feasible region is a convex set.
Concave programming, a form of non-linear programming, is used to optimize
functions subject to inequality constraints. The objective and constraint
functions are assumed concave. Since the negative of a convex function is
concave, it also considers convex functions. Concave programming can minimize
a function by maximizing the negative of that function. The goal is to find the
point in the feasible region that minimizes the objective function. Some
applications of concave programming include portfolio optimization, resource
allocation, and revenue management.

K A R U S H -K U H N -T U C K E R (KKT) C O ND IT IO NS
The Karush-Kuhn-Tucker (KKT) conditions, also known as the Kuhn-
Tucker (KKT) conditions, are a set of first-order necessary conditions for
solving non-linear optimization problems (with equality and inequality
constraints), including concave programming problems.

The Kuhn–Tucker approach to nonlinear programming extends the Lagrange


multiplier method by accommodating inequality constraints in addition to
Chapter 20 | Nonlinear Programming and Envelope Theorem 265

equality constraints. Similar to the Lagrange approach, the optimization problem


with constraints is reformulated as a Lagrange function. The optimal point of this
Lagrange function represents a global saddle point, serving as both a global
maximum (minimum) over the domain of choice variables and a global
minimum (maximum) over the multipliers. This is why the Karush–Kuhn–
Tucker theorem is also known as the saddle-point theorem. Originally
introduced by Harold W. Kuhn and Albert W. Tucker in 1951, the Kuhn–Tucker
conditions were later found to have been articulated by William Karush in his
1939 master's thesis.

Given an optimization problem:


maximize 𝑓(𝑥1 , 𝑥2 )
Subject to 𝑔(𝑥1 , 𝑥2 ) ≤ 0 𝑥1 , 𝑥2 ≥ 0

The Lagrangian function is,

𝑍 = 𝑓(𝑥1 , 𝑥2 , 𝜆) + 𝜆𝑔(𝑥1 , 𝑥2 )

The Kuhn-Tucker conditions are


𝜕𝑍
1. a) = 𝑓𝑖 (𝑥̅1 , 𝑥̅2 ) + 𝜆̅𝑔𝑖 (𝑥̅1 , 𝑥̅ 2 ) ≤ 0 (≥ for a minimization problem)
𝜕𝑥𝑖

b) 𝑥𝑖 ≥ 0
𝜕𝑍
c) 𝑥̅𝑖 =0 𝑖 = 1,2
𝜕𝑥𝑖

𝜕𝑍
2. a) = 𝑔(𝑥̅1 , 𝑥̅2 ) ≥ 0 (≤ for a minimization problem)
𝜕𝜆

b) 𝜆̅ ≥ 0
𝜕𝑍
c. 𝜆̅ =0
𝜕𝜆

𝜕𝑍
where the condition 𝜆̅ = 0 is called the complementary-slackness condition,
𝜕𝜆
meaning that both 𝑥̅ and 𝑓′(𝑥̅ ) cannot simultaneously both be nonzero.

The rationale for the conditions (a) to (c) is demonstrated in the three scenarios
Figure 20.1 For a value 𝑥 to give a local maximum, it must satisfy the following
three conditions:

A: interior solution 𝑓 ′ (𝑥) = 0 and 𝑥>0

C: boundary solution 𝑓 ′ (𝑥) = 0 and 𝑥=0

D or F: both boundary solutions 𝑓 ′ (𝑥) < 0 and 𝑥=0

The three conditions can be summarized as

𝑓 ′ (𝑥) = 0 𝑥≥0 and 𝑥𝑓 ′ (𝑥) = 0

which are obviously part of the Kuhn-Tucker conditions.


266 Olaniyi Evans | University Mathematics

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