INTRODUCTION TO

MANAGEMENT
SCIENCE, 13e
Anderson Slides by
Sweeney JOHN
Williams LOUCKS
Martin St. Edwards
University
Chapter 3
Linear Programming: Sensitivity Analysis
and Interpretation of Solution
Introduction to Sensitivity Analysis
Graphical Sensitivity Analysis
Sensitivity Analysis: Computer Solution
Simultaneous Changes
Introduction to Sensitivity
In the previous chapter we discussed: Analysis
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
Introduction
Sensitivity analysisto
(or Sensitivity Analysis
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 a manager who must operate in a
dynamic environment with imprecise estimates of the coefficients.
Sensitivity analysis allows a manager to ask certain what-if questions
about the problem.
Example 1
LP Formulation

Max 5x1 + 7x2

s.t. x1 < 6
2x1 + 3x2 < 19
x1 + x2 < 8

x1, x2 > 0
Example 1
Graphical Solution
x2
8
x1 + x2 < 8
Max 5x1 + 7x2
7
6 x1 < 6
5
Optimal Solution:
4 x1 = 5, x2 = 3
3
2x1 + 3x2 < 19
2
1
x1
1 2 3 4 5 6 7 8 9 10
Objective Function
Let us consider how changesCoefficients
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 1 of Objective Function
Changing Slope
x2
Coincides with
8 x1 + x2 < 8
7 constraint line
6 Objective function
5 5 line for 5x1 + 7x2
4 Coincides with
3
2x1 + 3x2 < 19
Feasible
4 constraint line
2 Region
3
1
1 2
x1
1 2 3 4 5 6 7 8 9 10
Range of the
Graphically, Optimality
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.
Slope of an objective function line, Max c1x1 + c2x2, is -c1/c2, and
the slope of a constraint, a1x1 + a2x2 = b, is -a1/a2.
Example 1
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, x1 + 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
Example 1
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

 Sensitivity Analysis: Computer Solution

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)
 Example 1

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 0.33333333
$C$8 X2 3.0 0.0 7 0.5 2

Constraints
Final Shadow Constraint Allowable Allowable
Cell Name Value Price R.H. Side Increase Decrease
$B$13 #1 5 0 6 1E+30 1
$B$14 #2 19 2 19 5 1
$B$15 #3 8 1 8 0.33333333 1.66666667
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.
As the RHS increases, other constraints will become binding and
limit the change in the value of the objective function.
Dual Pricea dual price is determined by adding +1 to the right
Graphically,
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
A resource cost and Sunk
is a relevant cost if Cost
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.
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 1
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.
Example
Dual Prices 1
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.
 Example
Dual Prices 1

Adjustable Cells
Final Reduced Objective Allowable Allowable
Cell Name Value Cost Coefficient Increase Decrease
$B$8 X1 5.0 0.0 5 2 0.33333333
$C$8 X2 3.0 0.0 7 0.5 2

Constraints
Final Shadow Constraint Allowable Allowable
Cell Name Value Price R.H. Side Increase Decrease
$B$13 #1 5 0 6 1E+30 1
$B$14 #2 19 2 19 5 1
$B$15 #3 8 1 8 0.33333333 1.66666667
Range ofofFeasibility
The range 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.
 Example 1
Range of Feasibility

Adjustable Cells
Final Reduced Objective Allowable Allowable
Cell Name Value Cost Coefficient Increase Decrease
$B$8 X1 5.0 0.0 5 2 0.33333333
$C$8 X2 3.0 0.0 7 0.5 2

Constraints
Final Shadow Constraint Allowable Allowable
Cell Name Value Price R.H. Side Increase Decrease
$B$13 #1 5 0 6 1E+30 1
$B$14 #2 19 2 19 5 1
$B$15 #3 8 1 8 0.33333333 1.66666667
Example 2: isOlympic
Olympic Bike Bike
introducing two newCo.
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 on the next slide.
 Example 2: Olympic Bike Co.

A supplier delivers 100 pounds of the

aluminum alloy and 80 pounds of the steel
alloy weekly.

Aluminum Alloy Steel Alloy

Deluxe 2 3
Professional 4 2

How many Deluxe and Professional frames should

Olympic produce each week?
Example 2: Olympic Bike Co.
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.
Example 2: Olympic Bike Co.
Model Formulation (continued)

Max 10x1 + 15x2 (Total Weekly Profit)

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

3x1 + 2x2 < 80 (Steel Available)

x1, x2 > 0
Example 2: Olympic
Partial Spreadsheet: Bike Co.
Problem Data

A B C D
1 Material Requirements Amount
2 Material Deluxe Profess. Available
3 Aluminum 2 4 100
4 Steel 3 2 80
Example 2: Olympic
Partial Spreadsheet Bike Co.
Showing Solution

A B C D
6 Decision Variables
7 Deluxe Professional
8 Bikes Made 15 17.500
9
10 Maximized Total Profit 412.500
11
12 Constraints Amount Used Amount Avail.
13 Aluminum 100 <= 100
14 Steel 80 <= 80
Example 2: Olympic Bike Co.
Optimal Solution

According to the output:

x1 (Deluxe frames) = 15
x2 (Professional frames) = 17.5
Objective function value = $412.50
Example 2: Olympic Bike Co.
Range of Optimality
Question:
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?
 Example 2: Olympic Bike Co.
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 8.333333333

Constraints
Final Shadow Constraint Allowable Allowable
Cell Name Value Price R.H. Side Increase Decrease
$B$13 Aluminum 100 3.125 100 60 46.66666667
$B$14 Steel 80 1.25 80 70 30
Example 2: Olympic Bike Co.
Range of Optimality
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.
Because 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.
Example 2: Olympic Bike Co.
Range of Optimality
Question:
If the unit profit on deluxe frames were $6 instead of $10,
would the optimal solution change?
 Example 2: Olympic Bike Co.
Range of Optimality

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 8.333333333

Constraints
Final Shadow Constraint Allowable Allowable
Cell Name Value Price R.H. Side Increase Decrease
$B$13 Aluminum 100 3.125 100 60 46.66666667
$B$14 Steel 80 1.25 80 70 30
Example 2: Olympic Bike Co.
Range of Optimality
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.
Because 6 is outside this range, the optimal solution would change.
Simultaneous
Range of OptimalityChanges
and 100% Rule

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 the change divided by the corresponding maximum
allowable change in the range of optimality for each
coefficient does not exceed 100%.
Example 2: Olympic
Range of Optimality and 100%Bike
Rule Co.
Question:
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?
 Example 2: Olympic Bike Co.

Range of Optimality and 100% Rule

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.
Simultaneous
Range of Feasibility Changes
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%.
Example 2: Olympic
Range of Feasibility Bike Co.
and Sunk Costs
Question:
Given that aluminum is a sunk cost, what is the maximum
amount the company should pay for 50 extra pounds of aluminum?
 Example 2: Olympic Bike Co.
Range of Feasibility and Sunk Costs

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 8.333333333

Constraints
Final Shadow Constraint Allowable Allowable
Cell Name Value Price R.H. Side Increase Decrease
$B$13 Aluminum 100 3.125 100 60 46.66666667
$B$14 Steel 80 1.25 80 70 30
Example 2: Olympic
Range of Feasibility Bike Co.
and Sunk Costs
Answer:
Because 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. Because 50 is in this
range, the $3.125 is valid. Thus, the value of 50 additional pounds is
= 50($3.125) = $156.25.
Example 2: Olympic
Range of Feasibility Bike
and Relevant Co.
Costs
Question:
If aluminum were a relevant cost, what is the maximum
amount the company should pay for 50 extra pounds of aluminum?
 Example 2: Olympic Bike Co.

Range of Feasibility and Relevant Costs

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
 Example 3
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
 Example 3
The Management Scientist Output (continued)

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
Example 3
Optimal Solution

According to the output:

x1 = 1.5
x2 = 2.0
Objective function value = 27.00
Example 3
Range of Optimality
Question:
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?
Example 3 Scientist Output
The Management

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
Example 3
Range of Optimality
Answer:
The output states that the solution remains optimal as long as
the objective function coefficient of x1 is between 0 and 12.
Because 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.
Example 3
Range of Optimality
Question:
How much can the unit cost of x2 be decreased without concern
for the optimal solution changing?
Example 3 Scientist Output
The Management

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
Example 3
Range of Optimality
Answer:
The output states that the solution remains optimal as long as
the objective function coefficient of x2 does not fall below 4.5.
Example 3
Range of Optimality and 100% Rule
Question:
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?
Example 3
Range of Optimality and 100% Rule
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.
Example 3
Range of Feasibility
Question:
If the right-hand side of constraint 3 is increased by 1, what will
be the effect on the optimal solution?
Example 3 Scientist Output
The Management

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
Example 3
Range of Feasibility
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.