Hun Myoung Park

Tuesday, February 01, 2011

Linear Programming and Policy Modeling1

Linear Programming (LP), a type of mathematical programming, is pioneered by George B. Dantzig in the U.S. Air Force, who developed the simplex method in 1947 to solve military logistics problems.2 LP has been widely used in the private sector (e.g., manufacture and aviation business) but less employed in the public sector largely due to its somewhat strong assumptions. But its model formulation and core concepts (e.g., reduced cost and shadow price) are valuables to policy analysts and public managers. 1. Underlying Assumptions LP has core underlying assumptions of certainty, divisibility, and linearity (proportionality, additivity, and homogeneity), which are seldom satisfied precisely in the real world. They are strong enough in this sense. See pp. 78-81 of Albright & Winston (2005) and pp. 36-42 of Hillier & Lieberman (2010). 1.1 Certainty (deterministic or nonstochastic) Every piece of information (i.e., coefficients in the objective function and constraints) is known. LP is deterministic without any risk and uncertainty; therefore, LP often uses average to summarize the reality assuming certainty. The environmental variables (the right-hand side values of constraints) are not probabilistic. The outcomes do not have any probability distributions. If outcomes are affected by weather (e.g., rain, temperature, humidity, and wind) and social events (e.g., war, strike, recession, and disease), the assumption is likely to be violated. 1.2 Divisibility The legitimate values of the decision variables are non-negative real numbers including integers. Integer programming, a variant of LP, can handle indivisiblility. 1.3 Linearity includes proportionality, additivity, and homogeneity that are closely related each other. Proportionality means that the outcome variables are proportional to the level of the decision variables. That is, the coefficients in constraints or objective function are constants. If different workers had different productivities, for example, this assumption (homogeneity) is violated. Additivity means that the production possibility frontier is a straight line. The contribution of a decision variable to the objective and any constraint is independent of other decision variables. The objective function and constraints are expressed by linear combination of decision variables. This assumption rules out synergies or complementarities between decision variables (no interaction term is allowed in the objective function and constraints). Homogeneity requires that all units of decision, outcome, and environmental variables are assumed to be identical. For example, individual employees have the same productivity; materials (e.g., gas, water, and timber) have the same quality; and each type of machines (e.g., snow blower and excavator) has the same function and efficiency.

This class note is based on David Goods lecture and textbooks. But, this note SHOULD NOT be used as a substitute of textbooks. 2 The original name is Programming of Interdependent Activities in a Linear Structure. 1

 Hun Myoung Park

Tuesday, February 01, 2011

2. Components of Mathematical Programming 2.1 Decision variables are the alternatives that are settable (controllable) by decision makers. These variables should appear in the By Changing Cells box of Excel Solver. 2.2 Objective function is a mathematical expression for a single goal (e.g., maximizing profit or minimizing cost) that you want to optimize: Max(ixi) or Min(ixi). This objective function should appear in the Set Target Cell input box in Excel Solver.

2.3 Constraints describe environmental, technological, legal, and other factors which limit your choices. A constraint compares an outcome variable, which is determined by a combination of decision variables, on the left-hand side (LHS) and an associated environmental variable on the right-hand side (RHS): ixi ci, ixi ci , or ixi = ci. For example, the total amount of snow removed by sprinkler systems and snow blowers should be larger than 9,000 tons per day (average daily snowfall on the major streets). Constraints should appear in the Subject to the Constraints box in Excel Solver. 2.4 Nonnegativity restricts decision variables to having nonnegative values: xi 0. In general, it is not possible that a decision variable has a negative value (e.g., the number of snow blowers mobilized is -10. Does this sentence make sense?). Excel Solver has an option where you can choose Assume Non-Negative. 3. Types of Linear Programming Product mix and blending problems are most common but there are variants of LP problems. 3.1 Product mix problem maximizes the value (profit) of the outputs produced given a set of resources available. For instance, How do I have to use sprinkler systems and snow blowers available to maximize the amount of snow removed? 3.2 Blending problem minimizes the cost of production (value of resources) given a set of outputs determined by decision makers. For example, How do I have to use sprinkler systems and snow blowers to minimize the cost of removing 9,000 tons? 3.3 Transportation and assignment problems. In a transportation problem, decision variables involve matching things from origins and destinations and the objective function is often to minimize travel time or cost subject to supply constraints (resource limitations or capacities) and demand constraints (minimum requirement of to be transported). Assignment problems always have exactly one unit for each demand (task) and exactly
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Tuesday, February 01, 2011

one unit for each source supply (person), and their solutions are integer (integer programming) 3.4 Variants of LP Integer programming Binary programming Goal programming 4. Steps in Formulating LP Problems 4.1 Evaluate the relevance of applying LP to the problem on hand. Does this problem fit a standard LP pattern (product mix or blending)? Example 3.2 in Albright & Winston (2005) has all pieces of necessary information (e.g., frame prices, availability of labor, metal, and glass, production function, and profit function) under certainty. This is a classical LP product mix problem. 4.2 Determine decision variables and assign relevant symbols (e.g., x1, x2, x3 rather than x, yy, xyz). Ask yourself if you can control the values of policy variables or if they are determined by others (environments). In Example 3.2, the decision variables are the numbers of frames 1 through 4 to be produced and are labeled as x1 through x4. 4.3 Define the criterion variable using a mathematical (linear) expression of decision variables (policy variables). This is an objective function. You may maximize the profit (product mix) or minimize the cost of production (blending). In Example 3.2, the objective function is maximizing the profit from producing frame 1 through 4 and its corresponding expression is Max(6x1 + 2x2 + 4x3 + 3x4). Note that 6, 2, 4, and 3 are unit profit for frame 1 through 4. For example, unit profit for frame 2 is 2 =$12.5-1(8.00)2(.50)-2(.75) since one unit of frame 2 needs one unit of labor, two units of metal, and two units of glass. See page 85 for their computation. 4.4 Incorporate constraints that compare outcome variables, which are expressed using decision variables, on the left-hand side with corresponding environmental variables on the right-hand side. For example, the constraint for labor says, Do not use more labor than 4,000 hours in any circumstance for producing frames and can be expressed as 2x1 + x2 + 3x3 + 2x4 4,000. The constraint for frame 1 says, Do not produce more frame 1 than 1,000 because of its limited market demand of 1,000) and can be expressed as x1 1,000. DO NOT forget to include nonnegativity constraints. As a result, the product mix problem of producing frames is summarized as: Max(6x1 + 2x2 + 4x3 + 3x4) Subject to: 2x1 + x2 + 3x3 + 2x4 4,000 (labor constraint) 4x1 + 2x2 + x3 + 2x4 6,000 (metal constraint) 6x1 + 2x2 + x3 + 2x4 10,000 (glass constraint) x1 1,000 (sales limit of frame 1) x2 2,000 (sales limit of frame 2) x3 500 (sales limit of frame 3) x4 1,000 (sales limit of frame 4) x1, x2, x3, x4 0 (nonnegativity)
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Tuesday, February 01, 2011

4.5 Check units of measurement so that coefficients and decision variables in the objective function and constraints are commensurable. For example, the unit of 6 (coefficient of frame 1 in the objective function) is $ per labor hour (=$/hour) and unit of x is labor hour. Therefore, 6 x1 results in $ (=$/hour hour); Okay, that makes sense! Similarly, 3 x3 in the labor constraint returns labor hours (=labor hours/frame 3 frame 3). If the coefficient of a decision variable x1 is measured in million USD per frame 1 and the unit of x1 is 1,000 frame 1, you will be in trouble. What if a variable is measured in gallon and its coefficients in the objective function and constraints has some units per gram or pound (e.g., Killowatt/gram)? Also you have to adjust scales to avoid too large numbers or too smaller numbers (e.g., 1billion or 1,000 million rather than 1,000,000,000); the former may result in the overflow problem, whereas the latter ends up getting misreading numbers due to underflow. In Example 3.2, the scales of coefficients (e.g., 6, 2, 4, 3 for the objective function) and resources (e.g., labor hour and ounce) are reasonable. See pp. 80-81 of Albright & Winston (2005). 4.6 Translate the objective function (including decision variables) and constraints into the expressions that computer software packages (e.g., SAS/OR, LINDO/LINGO, and Excel Solver) can understand. Of course, you may solve LP problems using the graphical method (identify the feasible set defined by constraints; find the corners of the feasible set; evaluate the value of the objective functionisoprofit line at each corner; and determine the corner which has the best value) or the simplex method by hand. For data input in Excel, see pp. 64-66 of Albright & Winston (2005). In addition, see a SAS script below to solve Example 3.2. SAS/OR by default assumes nonnegativity.
DATA product_mix; INPUT _ID_ $ x1 x2 x3 x4 _TYPE_ $ _RHS_; DATALINES; object 6 2 4 3 MAX . labor 2 1 3 2 LE 4000 Metal 4 2 1 2 LE 6000 glass 6 2 1 2 LE 10000 frame1 1 0 0 0 LE 1000 frame2 0 1 0 0 LE 2000 frame3 0 0 1 0 LE 500 frame4 0 0 0 1 LE 1000 RUN; PROC LP; RUN;

4.7 Albright & Winston (2005) suggest an Excel input style for LP that is logical and systematic. But my preferred style is one that arranges elements from 1) raw data (e.g., price and coefficients), 2) decision variables, 3) the objective functions, 4) constraints, and, if any, 5) intermediate computations as shown in the SAS data input above; this style is more logical and systematic.3 See ProductMix2.xls available on the course Web page. 5. General Principles of LP Solutions There are general rules regarding corner solutions. A corner is an intersection of constraints lines and appears on the edge of the feasible set. See pp. 62-63 of Albright & Winston (2005).

I dont like the first part of their convention, to enter enough range names but not to go overboard. My suggestion is to use modeling concepts (e.g., objective instead of Profit, decision instead of Frames_ produced, constraint1_3 instead of Resource_used, and RHS1_3 instead of Resources_available). 4

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Tuesday, February 01, 2011

5.1 The solution cannot be in the interior of the feasible set. 5.2 The solution must involve a corner of the feasible set (as opposed to other alternative points on the edge). The only exception is where the isoprofit line is parallel to one of the constraints (multiple solutions). 5.3 If two corners have the same best value, then all combinations between them are also solutions. This case occurs when the isoprofit line has the same slope as one of the constraints; the entire edge of the feasible set is optimal. 5.4 If we are searching at a corner, and the value of objective function goes down at all adjacent corners of the feasible set, you must be at the solution (this is the stopping rule that the simplex method use). Table 1. Excel Solvers Answer Report (Example 3.2 of Albright & Winston)
Target Cell (Max) Cell Name
$F$32 Profit

Original Value
$9,200

Final Value
$9,200

Adjustable Cells Cell Name

$B$16 $C$16 $D$16 $E$16 Frames produced Frames produced Frames produced Frames produced

Original Value
1000 800 400 0

Final Value
1000 800 400 0

Constraints Cell
$B$21 $B$22 $B$23 $B$16 $C$16 $D$16 $E$16

Name
Labor hours Used Metal (oz.) Used Glass (oz.) Used Frames produced Frames produced Frames produced Frames produced

Cell Value
4000 6000 8000 1000 800 400 0

Formula
$B$21<=$D$21 $B$22<=$D$22 $B$23<=$D$23 $B$16<=$B$18 $C$16<=$C$18 $D$16<=$D$18 $E$16<=$E$18

Status
Binding Binding Not Binding Binding Not Binding Not Binding Not Binding 0 0

Slack

2000 0 1200 100 1000

6. Interpretation of the Objective Function (Optimal Solution) Under normal conditions, the final values of decision variables in the final tableau are optimal solution that maximizes or minimizes the objective function. 6.1 Unique optimal solution. When implementing the optimal solution (a set of values of decision variables), you will get the optimal value (maximum profit or minimum cost) of the objective function. Table 1 suggests the optimal solution of producing 1,000 frame 800 frame 2,400 frame 3, and zero frame 4 that will bring a profit of 9,200 to you. This production consumes 4,000 labor hours, 6,000 ounces of metal, and 8,000 ounces of glass. 6.2 Reduced cost is relevant only for decision variables that have a zero value at the optimal solution. If a decision variable has a positive value at the solution, its reduced cost will always be zero. Hillier and Lieberman (2010) say, [I]t is the minimum amount by which

 Hun Myoung Park

Tuesday, February 01, 2011

the unit cost of activity j would have to be reduced to make it worthwhile to undertake activity j (increase xj from zero) (p.234). From a theoretical view, Winston (2004) states, The reduced cost for a nonbasic variable is the maximum amount by which the variables objective function coefficient can be increased before the current basis becomes suboptimal, and it become optimal for the nonbasic variable to enter the basis (pp. 277-278). Reduced cost is about how much a coefficient of the objective function would have to decrease for you to start producing a particular output (more than or equal to 1 unit). In Table 2, the optimal value of frame 4 is zero and its reduced cost is -.2.4 This reduced cost can be interpreted as 1) if you want to (forcefully) produce at least one frame 4, its coefficient in the objective function should be reduced at least by -.2 (or increased by .2) or 2) when you increase the objective function coefficient of frame 4 at least by .2, the new optimal solution includes more than or equal to 1 unit of frame 4. In this case, the solution and objective value will change accordingly. See pp. 70-74 of Albright & Winston (2005) and pp.233-235 of Hillier & Lieberman (2010). 6.3 Ranging information of the coefficient of a decision variable in the objective function provides an allowable increase and an allowable decrease (or lower and upper bounds) of a coefficient in the objective function. This information tells us how flexible objective function coefficients are or how much a coefficient of the objective function can increase or decrease while having the optimal solution remain unchanged. An allowable increase and an allowable decrease are not necessarily symmetric. As long as coefficients of the objective function stay within the range, the optimal solution to the problem remains the same but the objective value might change due to the change in the coefficient. In Table 2, the current coefficient 6 of frame 1 can change from 4 (=6-2) to 6+1030 (6+1E+30, virtually positive infinity) without influencing the current optimal solution (a set of values of decision variables). Note that 2 is its allowable decrease and +1030 is its allowable increase. The coefficient of frame 2 ranges from 1.75 (=2-.25) to 3 (=2+1) and frame 3 coefficient from 3.5 (=4-.5) to 6 (4+2). Table 2. Excel Solvers Sensitivity Report (Example 3.2 of Albright & Winston)
Adjustable Cells Cell
$B$16 $C$16 $D$16 $E$16

Name
Frames produced Frames produced Frames produced Frames produced

Final Value
1000 800 400 0

Reduced Cost
2.0 0.0 0.0 -0.2

Objective Coefficient
6 2 4 3

Allowable Increase
1E+30 1 2 0.2

Allowable Decrease
2 0.25 0.5 1E+30

Constraints Cell
$B$21 $B$22 $B$23

Name
Labor hours Used Metal (oz.) Used Glass (oz.) Used

Final Value
4000 6000 8000

Shadow Price
1.2 0.4 0.0

Constraint R.H. Side

4000 6000 10000

Allowable Increase
250 2000 1E+30

Allowable Decrease
1000 500 2000

The reduced cost of 2.0 for frame 1 does not make any sense because the value of decision variable for frame 1 is 1,000 (nonzero!). This Excel report seems misleading somewhat. In fact, the 2.0 should be the shadow price of constraint of the market demand of frame 1. The interpretation is, For 1 increase in the market demand of frame, the profit is expected to increase by $2, holding other variables constant. Excel Solver also returns wrong allowable increase (infinity) and decrease (2); Quattro Pro Optimizer reports 400 and 600, respectively. 6

 Hun Myoung Park

Tuesday, February 01, 2011

Corel Quattro Pro Optimizer produces similar result as Excel Solver does (See ProductMix.qpw available on the course Web site). But the Optimizer does not assume nonnegativity and thus asks users to explicitly input the nonnegativety constraint. Unlike Excel Solver, the Optimizer reports reduced prices for objective function coefficients under the Dual Value column. But the allowable increase (1,000) and decrease (250) of the coefficient for frame 4 is questionable; Excel Solvers allowable increase (.2) and decrease (infinity) seem more reasonable (correct).5

Table 3. Quattro Pro Optimizers Sensitivity Report (Example 3.2 of Albright & Winston)
Solution Cell
A:H17

Starting Final
7500 9200

Variable Cells Starting Final

A:B14..B14 A:C14..C14 A:D14..D14 A:E14..E14 200 2000 200 500 1000 800 400 0

Gradient Increment Decrement

6 2 4 3 Infinite 1 2 0.2 2 0.25 0.5 Infinite

Cell
A:B20..B20 A:B21..B21 A:B22..B22 A:B23..B23 A:B24..B24 A:B25..B25 A:B26..B26 A:B14..B14 A:C14..C14 A:D14..D14 A:E14..E14

Value
4000 6000 8000 1000 800 400 0 1000 800 400 0

Constraint Binding? Slack

<=4000 <=6000 <=10000 <=1000 <=2000 <=500 <=1000 >=0 >=0 >=0 >=0 Yes Yes No Yes No No No No No No Yes 0 0 2000 0 1200 100 1000 1000 800 400 0

Dual Value Right Value Increment Decrement

1.2 0.4 0 2 0 0 0 0 0 0 -0.2 4000 6000 10000 1000 2000 500 1000 0 0 0 0 250 2000 Infinite 400 Infinite Infinite Infinite 1000 800 400 1000 1000 500 2000 600 1200 100 1000 Infinite Infinite Infinite 250

7. Problematic Solutions If a LP problem does not have a unique solution, it may have either no solutions (infeasible solution and unbounded solution) or unreliable solutions (multiple solutions and degeneracy).
In Excel, worksheets are referred to by sheet1!, sheet2!, , whereas Quattro Pro by default use A:, B:, They respectively use : and .. to indicate a range of cells (e.g., B2:D5 in Excel and B2..D5 in Quattro Pro). 7
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Tuesday, February 01, 2011

7.1 Infeasible solutions occur when no alternative satisfies all of the constraints. The problem may be over-constrained. You are not given sufficient resources to carry that out when producing a certain amount of output. Or you might mistakenly enter constraints (e.g., instead of ) or incorrectly formulated the problem. If any nonzero artificial variable appears in the set of basic feasible variables in the final tableau, it indicates infeasible solution. See pp. 81-82 of Albright & Winston (2005). 7.2 Unbounded solutions. The optimal values of at least one of the decision variables are infinite. Unbounded solutions will occur when necessary constraints are excluded from the problem or constraints are incorrectly entered (e.g., instead of ). We can recognize this solution when there is no positive coefficient in the pivot column in the tableau of any round except for the final tableau. In this case, the ranges of RHS and coefficients in the objective function cannot be calculated. 7.3 Multiple solutions occur when the objective function slope is the same as the slopes for one of the constraints. You will observe multiple solutions if one or more of the allowable increases or decreases for the coefficients of the objective function are zero. In this circumstance, the slightest change in the coefficient would force us to a new corner and have the solution change; that is, the solution is shaky. 7.4 Degeneracy (or degenerate solution) occurs if a corner which is defined by more than the minimum number of constraints also turns out to be the optimal corner. You can detect degeneracy, 1) if a constraint which is binding (zero slack or surplus) also has a zero shadow price, 2) if the ranging information for some constraints has a zero allowable increase or decrease, and/or 3) if basic feasible variables have zero values in the final tableau. Degeneracy is particularly a problem for shadow prices. If we have too many binding constraints at the optimal corner, and we relax or tighten one of them, then the combination of constraints which are binding will change, and shadow price information is no longer reliable. 8. Interpretation of Constraints Binding and non-binding constraints define the feasible set, whereas superfluous and redundant constraints do not. 8.1 Binding constraints limit the optimal solution by forming the boundary of the feasible set. The solution lies right on the top of these binding constraint lines; resources of these constraints are fully utilized (zero slack or surplus). They form the bottle necks or primary limiting factors in the solution. Changing these constraints might produce a different solution to the problem. Therefore, the binding constraints are the most important for public managers (decision makers). Excel Solver indicates if a constraint is Binding or Not Binding under the Status column. In Table 1, the labor and metal constraints are binding and all available labor and metal were used for production (zero slack). Similarly, the constraint for frame 1 is binding with zero slack. 8.2 Non-binding constraints are not satisfied as equality at the optimal solution. Not all the resources are utilized (slack or surplus is greater than zero). In Table 1, the glass constraint is not binding and 2,000 ounces of glass were not used (nonzero slack).

 Hun Myoung Park

Tuesday, February 01, 2011

Similarly, the constraints of frame 2 through 3 are not binding since their slacks are not zeros. 8.3 Superfluous constraints never touch the feasible set, whereas redundant constraints contain exactly the same limitation information as another constraint. Superfluous and redundant constraints are not important, if not useless, because ignoring them would lead to exactly the same choice. 8.4 Slack and surplus. Slack is calculated for a type constraint usually for resource limitations, while surplus is for a type constraint usually for decision variables.6 Slack describes the amount of slack or unutilized resources (RHS-LHS) and surplus describes the amount by which a minimum requirement has been exceeded (LHS-RHS). In Table 1, the optimal solution suggests that 4,000 hours of labor, 6,000 ounces of metal, and 8,000 ounces of glass be utilized to maximize the profit of $9,200. Labor and metal uses reach their maximums but glass use does not. Therefore, the slack (remember, this is a type constraint) of labor and metal is zero; 0=4,000 (maximum value of RHS)-4,000 (LHS) and 0=6,000-6,000. Similarly, the slack of glass use is 2,000=10,000-8,000. The slacks of constraints for frame 2 through 3 are 1,200 (=2,000-800), 100 (=500-100), and 1,000 (=1,000-0), respectively. If the slack or surplus of a constraint is zero, the constraint is binding (constraints for labor, metal, and frame 1). Otherwise, the constraint is not binding (glass and frame 2 through 4). Slack and surplus can never be negative at the optimal solution. 9. Interpretation of Shadow Price Shadow price (or dual value) asks how much better the objective function would be if the constraint could be changed a little bit. This shadow price contains very important implications for decision making. Shadow price tells us something about the maximum we should be willing to pay to relax a constraint by one unit. Relaxing a constraint means that the feasible set becomes expanded and more alternatives will be considered. See pp.70-74 of Albright & Winston (2005) and pp.131-136 of Hillier & Lieberman (2010). 9.1 The shadow price can also be regarded as a rate at which the objective function changes as you add or delete resources to the constraint. This price is not a price of a product, of course, but the amount of improvement in the objective function that occurs when we relax a constraint by one unit. In other word, for each additional unit of a resource (RHS value of the constraint) the amount of profit of the objective function is expected to increase by that shadow price. In Table 2, find that the shadow prices of labor and metal are 1.2 and .4, respectively; for instance, if you increase the maximum labor hours by 1 hour, 4,001=4,000+1, the profit will increase by $1.2. Policy analyst and public managers should consider labor and metal as key factors that influence the profit significantly. The shadow price of glass is zero because of the presence of nonzero slack (unused glass available to you); increasing the maximum of glass does not influence the objective function. 9.2 Complementary slackness. At the optimal solution to the LP problem, the shadow price of a nonbinding constraint with positive slack/surplus is zero. Conversely, if the shadow
Albright & Winston (2005) do not distinguish surplus from slack. Excel Solver indicates slack or surplus under Slack column. If a constraint has in the Formula column and a positive value in the Slack column, it is slack; if a constraint has and a positive value, it is surplus. 9
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price of a constraint is not zero, then the constraint must be a binding constraint with zero slack or surplus. In Table 1 and 2, labor and metal have nonzero shadow price; their slacks are zero; and they thus are binding constraints. By contrast, the glass has zero shadow price and nonzero slack, and accordingly it is not a binding constraint. 9.3 Shadow price ranging information tells you the range of values for the RHS value of a constraint which does not alter the combination of binding constraints, and which leaves the shadow price information as valid. SAS/OR reports the range of RHS (RHS change) within which the combination of binding constraints remain unchanged, whereas Excel Solver produces an allowable increase and an allowable decrease of RHS ( change only). In Table 2, find an allowable increase of 250 and an allowable decrease of 1,000 for the labor constraint; that is, the maximum value (RHS) of labor may change from 3,000 (=4,000-1,000) to 4,250 (=4,000-250) within which the current shadow price 1.2 remains valid. Similarly, the RHS value of the metal constraint may change from 5,500 (=6,000500) to 8,000 (=6,000+2,000). If you increase the RHS beyond the range, the combination of constraints which is binding at the solution would change and you do not know what the new shadow price would be. DO NOT be confused with an allowable increase and an allowable decrease of a coefficient of the objective function and the RHS value of a constraint (see the table below). Table 4. Sensitivity Analysis for Objective Function Coefficients and RHS Values
Sensitivity Condition for being nonzero Where? Interpretation (meaning) Caution Allowable range A Coefficient of a Decision Variable Reduced cost The value of a decision variable is zero at the optimal solution Objective function Minimum amount of reduction of a objective function coefficient to force the decision variable to be produced A Right-hand Side Value Shadow price The slack/surplus of a constraint is zero (binding constraint) at the optimal solution Constraints Marginal change in the objective function value for unit increase in the RHS value

Not reliable in case of degeneracy Tolerable upper and lower bounds of Tolerable upper and lower bounds of a the coefficient of a decision variable. RHS value Symmetric? Allowable increase and decrease are not symmetric. Software issue SAS/OR reports the upper and lower bounds of the coefficient (or RHS): current coefficient or RHS valuechange (tolerable deviation or allowable increase/decrease), while Excel returns allowable increase/decrease (change) only * All analyses are done under the ceteris paribus assumption (holding all others things constant).

9.4 All of the sensitivity analysis, such as shadow prices and shadow price ranging information assumes that only one of the RHS values is changing at a time, holding all other variables being equal or constant (Ceteris Paribus assumption).

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