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Operational Reseach 1

Dynamic programming is a technique used to solve multi-stage decision problems by breaking them down into sequential sub-problems. It was developed by Richard Bellman in 1957 based on his principle that an optimal policy is one where the remaining decisions constitute an optimal policy given the state resulting from the previous decisions. Dynamic programming problems are characterized by stages with decision variables that modify the state into the next stage. The technique constructs recursive equations to determine the optimal policy at each stage in a way that leads to the overall optimal solution. Common applications of dynamic programming include production planning, inventory control, and resource allocation.

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42 views9 pages

Operational Reseach 1

Dynamic programming is a technique used to solve multi-stage decision problems by breaking them down into sequential sub-problems. It was developed by Richard Bellman in 1957 based on his principle that an optimal policy is one where the remaining decisions constitute an optimal policy given the state resulting from the previous decisions. Dynamic programming problems are characterized by stages with decision variables that modify the state into the next stage. The technique constructs recursive equations to determine the optimal policy at each stage in a way that leads to the overall optimal solution. Common applications of dynamic programming include production planning, inventory control, and resource allocation.

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Rohan
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TOPIC:- Dynamic Programming

INTRODUCTION

Dynamic Programming (DP) is a technique used to solve a multi-stage decision


problem where decisions have to be made at successive stages.

 This technique is very much useful whenever if an optimization model has a


large number of decision variables.

 It is not having any generalized formulation. That is, we have to develop a


recursive equation to suit the situations.

 This technique was developed by Richard Bellman in 1957. This model is


derived based on the Bellman’s principle.
Bellman’s principle
‘An optimal policy has the property that whatever the initial state and
the initial decisions are, the remaining decisions must constitute an
optimal policy which regards to the state resulting from the first decision’.
The above stated principle forms the basis of a dynamic programming technique.
When the develop a recursive equation, we have to consider the Bellman’s
principle. A recursive equation expresses subsequent state conditions in terms of
the processed state conditions and it is based on the fact that a policy is ‘optimal’ if
the decision made at each stage results in overall optimality, over all the stages and
not only for the current stage. It can be used to solve problems of both nature
 Deterministic and
 Continuous.
Characteristics of a DPP

The characteristics can be listed as follows:


 The given problem can be subdivided into various stages with a clear policy
decision to be taken at each stage.
 Each stage comprises a number of states in it.
 Decision taken at each stage modifies the latest stage into a state related to the
next stage.
 In each stage the state of the system is referred by the state variables.
 If we know the current state, the optimum policy of the succeeding stages is
independent of the policy taken for the processed stages.
 Construct a recursive equation to make a decision based on the optimum policy
at each stage.
 After the construction of the recursive equation, regarding the solution, either
we can move forward or backward.
Merits and Demerits of a DPP

Merits
 A complex problem can be spilitted into a series of interrelated sub problems
and can be solved easily
 It is highly flexible.
 Built-in sensitivity analysis.
 Computational savings over Computer Enumeration Procedure.
Demerits
 DP is conceptually powerful but high degree of expertise and insight is required
for the efficient formulation of the problem.
 More storage space is required in the computer
 There is no unique algorithm
Application of Dynamic Programming
 Production
 Inventory Control
 Allocation of Resources
 Selection of advertising media
 Spare part level determination
 Equipment replacement policies
 Scheduling methods for routine and major overhaul on complex machinery
These are only few of the wide range of situation to which dynamic
programming has been successfully applied.
Dynamic Programming Approach
Stage:- As already discussed the problem is broken down into sub-problems and
each sub- problem is referred to as stage.
 it signifies a portion of decision problem for which a separate decision can be
made.
 At each stage there are no. of alternatives and the decision making process
involves the selection of one feasible alternative which may be called as stage
decision.
 The stage decision may not be optimal for the considered stage, but contribute
to make an overall optimal decision for the entire problem.
State:- this is the other important concept.
 The variables which specify the condition of decision process and summarize
the current status of the system are called state variable.
 For example in the capital budgeting problem, the capital is the state variable.
 The amount of capital allocated to the present stage and the preceding stage define
the status of the problem.
 The no. of state variable should be as small as possible
 The increase in no. of state variable, increases the difficulty of the problem solving.

In decision making process, at each stage, a decision is made to change the state of
the problem, with the aim of maximizing the return. At the next stage the decision
are made using the values of the state variable that result from the preceding stage
decisions.
Thank you!

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