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1. Summation Notation
x
i 1
i = x1 + x2 + + xn.
The Greek capital sigma, , indicates the summation operation, i.e., addition. (Note the
alliterative mnemonic device: sigma = summation.) The subscript i=1 and superscript n
on the capital sigma means that the index of summation, i, should take on all integer
values from 1 to n. Since the term following the summation sign is xi, this means that the
n
numbers x1 to xn are the quantities to be added together. The notation i 1
x i is just a
compact way of writing x1 + x2 + + xn.
1 n 1
n i 1
x i = (x1 + x2 + + xn).
n
The symbol i is called a dummy argument, because it has no effect on the result. Any
other letter could be used in its place, and the meaning would be the same. That is, the
average of x1, , xn could also be written as
1 n 1
n j 1
x j = (x1 + x2 + + xn).
n
2. Product Notation
Also useful is the symbol for a product, the Greek letter capital pi, . (The
mnemonic here is pi -- product.) To illustrate, suppose the return from an investment is
2% in the first month, 4% in the second month and -1% in the third month. Then the
total return for the three month period is (1.041.020.99) - 1 = 0.050192. In general the
total return for n time periods can be calculated as follows. Let r1, , rn represent the n
individual returns. The total return can be written as
n
Note that the product symbol (as well as the summation symbol) only applies to the
symbols in parentheses that immediately follow the product sign. That is,
n
Mathematical notation can be used to simplify the writing of very large problems.
To illustrate the idea on a small scale, consider the following LP known as a product mix
problem. This example will also illustrate the use of doubly subscripted letters.
Max 13 x1 + 23 x2
subject to some constraints:
corn) 5 x1 + 15 x2 480
hops) 4 x1 + 4 x2 160
malt) 35 x1 + 20 x2 1190
x1 0, x2 0
The general form of the product-mix problem uses the following quantities.
n is the number of products (n = 2 in our example).
xj represents the production level for product j, for j = 1, , n.
pj is the profit from production of one unit of product j, j = 1, , n. (In the
example, p1 = 13 and p2 = 23.)
m is the number of scarce resources (m = 3 in the example).
aij is the amount of resource i needed to produce one unit of product j,
for i = 1, , m and j = 1, , n. (In our example, a11 = 5, a12 = 15, a21 =
4, a22 = 4, a31 = 35, and a32 = 20.)
bi is the amount of resource i available, i = 1, , m. (In the previous
example, b1 = 480, b2 = 160, b3 = 1190.)
Note: The double subscript ij on the letter a does not indicate the
multiplication of i and j. If there is any chance of confusion, ij can be replaced
with i,j.
The letters used are of four types. First, n and m are used to indicate the size of
the problem. They represent the number of decision variables and constraints. Second,
i and j are indices, i.e. dummy arguments, used to number (or index) the variables and
constraints. Third, the xj's are decision variables, whose optimal values are not known
until the linear program is solved. Finally, the pj's, bi's, and aij's are given data. These
letters are used to represent numbers that are fixed in advance. Even though the data is
represented by letters, they are not variables that change, they are fixed quantities.
subject to:
n
a
j 1
1j x j b1
n
a
j 1
2j x j b2
n
a
j 1
3j x j b3
x1 0, x2 0
The preceding notation can be simplified further by noticing that all of the
constraints have exactly the same form. The most compact form is:
n
max p x
j 1
j j
subject to:
n
a x
j 1
ij j bi i 1,, m
xj 0 j = 1, ,n
We have saved some space by employing our knowledge of the pattern in the
constraints. Now we will explain what the new notation means.
The notation i = 1, , m means that there are m constraints. To write the first constraint
aij x j bi . This gives j 1a1j x j b1 . For the
n n
substitute i = 1 in the expression j 1
There are several advantages to writing the product-mix formulation using this
notation. First, all standard product-mix problems are represented by the same
formulation, and it pays to be familiar with the pattern that product-mix problems take—
so we can immediately recognize them when they arise. Second, it is very compact.
Just a few lines of text are used to represent a problem that could have n = 100
products and m = 1000 scarce resources. A problem this large would be difficult to
convey by directly writing out the entire formulation. Abbreviating the formulation with
ellipses () is not always clear. Third, it can be used to formulate a problem before the
data is gathered. The formulation can be used to see that the necessary data to gather
are the pj's, bi's and aij's.
1
One of the most common mistakes is to incorrectly write the m constraints
n
j 1
a ij x j bi i 1,, m
as
m n
i 1 j 1
a ij x j bi i 1,, m .
The latter is not correct. First, it only represents one constraint. Second, after expanding the
summations, the left-hand side doesn't depend on i, while the right-hand side does.
The general form of the transportation problem uses the following additional quantities.
cij is the unit cost of shipping from factory i to retail outlet j, for i = 1, ,
m and j = 1, , n. (In the previous example, c11 = 4, c12 = 3, c13 = 2,
c21 = 5, c22 = 4, and c23 = 6.)
si is the supply of goods at factory i, i = 1, , m. (In the previous
example, s1 = 10 and s2 = 15.)
dj is the demand requirement at retail outlet j, j = 1, , n. (In the
previous example, d1 = 8, d2 = 11, and d3 = 6.)
Using the previous definitions and summation notation, the previous linear program can
be written more succinctly as follows.
m n
min c x
i 1 j 1
ij ij
subject to:
n
supply i) x
j 1
ij si i 1,, m
c x (c x
i 1 j 1
ij ij
i 1
i i1 c i 2 x i 2 c in x in )
The subscript i, j on the summation sign means for all possible pairs of values of the
indices i and j. This has the same effect as the double summation.
Suppose there are m random variables, denoted X1, , Xm. Let a1, ,am be
constants. Then using the definitions of variance and covariance, the following formula
can be shown to hold.
m m m m
Var ( a j X j ) a 2j Var( X j ) 2 ai a j C ov( X i , X j ) .
j 1 j 1 i 1 j i
No doubt the formula looks a tad intimidating at first glance, even for those with
strong stomachs. But with a little persistence, we'll see it's not so bad. To understand
such a formula, it helps to write down a few special cases. For the case of m = 2
random variables, the formula is
Var(a1X1 + a2X2 + a3X3) = a12 Var(X1) + a22 Var(X2) + a32 Var(X3) + 2a1a2 Cov(X1,X2) +
2a1a3 Cov(X1,X3) + 2a2a3 Cov(X2,X3).
In this case, the double summation means “add over all pairs of indices i, j for
which j > i.” When i = 1 the indices j between 1 and m that meet the requirement are j =
The difference is in the way that the final double summation is written. To see that this
formula is equivalent to the one before, let's write it out for m=2.
The last equality follows from the symmetry property of covariance. In a similar manner,
the formula can be shown to be equivalent for any m.
Using the fact that Var(Xj) = Cov(Xj, Xj), the covariance formula can also be
written as
m m m
Var ( a j X j ) ai a j C ov( X i , X j ) .
j 1 i 1 j 1
Again, the equivalence of the different formulas can be seen by expanding the
summations and using the properties of covariance to simplify the result.
Acknowledgment: The note was originally prepared by Professor Mark Broadie, Graduate School of
Business, Columbia University 1995.
The linear programming formulation to maximize the firm's final net worth is given
next. The LP formulation uses the following decision variables:
Use the ideas in this note to formulate a general form of the project selection
linear program. In your formulation, assume that there are n possible projects to select
from and each project has cash requirements for the next m years. Define any notation
that is used in your formulation.