Linear Programming

Sensitivity of the Right Hand

Side Coefficients

Sensitivity of RHS Coefficients

RHS coefficients usually give some
maximum limit for a resource or some
minimum requirement that must be met.
Changes to the RHS can happen when extra
units of the resource become available or when
some of the original resource becomes
unavailable.
Or the minimum requirement is loosened (made
less) or strengthened (made greater).

Extra units may be available for a price.

The question becomes how much would an
extra unit add to the value of the objective
function, that is, what is the most we would be
willing to pay for extra units of the resource?

Finding the Optimal Point - Review

X2
1000

Max 8X1 + 5X2 = 4360

s.t. 2X1 + 1X2 1000 (Plastic)
3X1 + 4X2 2400 (Time)
1X1 + 1X2 700 (Limit)
1X1 - 1X2 350 (Mix)
X1, X2 0

900
800
700
600
500
400

OPTIMAL POINT
(320,360)

300
200
100
0
100

200

300

400

500

600

700

800

X1

X2
1000

Optimal Point With

One Extra Unit of Plastic
Shadow Price
(for Plastic)

900
800

4363.40 4360 =
(new profit)

- (old profit)

$3.40

700
600

Max 8X1 + 5X2 = 4363.40

s.t. 2X1 + 1X2 1000
1001 (Plastic)
3X1 + 4X2 2400 (Time)
1X1 + 1X2 700 (Limit)
1X1 - 1X2 350 (Mix)
X1, X2 0

500
400

New OPTIMAL
POINT
(320.8,359.4)

300
200
100

Still determined by
Plastic and Time constraints

0
100

200

300

400

500

600

700

800

X1

Shadow Prices
The shadow price for a constraint is the amount
the objective function value will change given:
1 additional unit on the RHS of the constraint
No other changes

This shadow price is valid as long as the same

constraints (including the one whose RHS is
changing) determine the optimal point.
In this case plastic and production time
It can be shown that if the RHS for plastic were 1002
the profit would increase another $3.40 to $4366.80.
It can also be shown that if the RHS for plastic were
999 the profit would decrease by $3.40 to $4356.60.

Allowable Increase and

Allowable Decrease
of a RHS Value
The shadow prices remain valid as long as the
same constraints (called the binding constraints)
constraints
determine the optimal point.

When the RHS of the constraint is increased or decreased

to the point that another constraint replaces one of the
binding constraints to determine the optimal point a new
shadow price becomes valid for the constraint.
The amount the RHS can increase or decrease before
another constraint becomes one of the binding
constraints is what Excel calls the Allowable Increase and
the Allowable Decrease respectively.

Increasing the Right Handside for

Plastic
X2
1000

Max 8X1 + 5X2

s.t. 2X1 + 1X2 1060
1000
1100 (Plastic)
1030
3X1 + 4X2 2400 (Time)
1X1 + 1X2 700 (Limit)
1X1 - 1X2 350 (Mix)
X1, X2 0

900
800
700
600
500

Plastic and Time constraints

still determine the optimal
solution to this point.

400
300
200
100
0
100

200

300

400

500

600

700

800

X1

Further Increasing
the Right Hand Side for Plastic

X2
1000

Max 8X1 + 5X2

s.t. 2X1 + 1X2 1060
1000
1102 (Plastic)
1100
1030
3X1 + 4X2 2400 (Time)
1X1 + 1X2 700 (Limit)
1X1 - 1X2 350 (Mix)
X1, X2 0

900
800
700
600
500

Further increases to the RHS side

of plastic have now made the plastic
and the Limit constraints as the ones
that determine the optimal point.

400
300
200

The shadow prices

will now CHANGE

100
0
100

200

300

400

500

600

700

800

X1

Decreasing the RHS for Plastic

X2
1000

Max 8X1 + 5X2

s.t. 2X1 + 1X2 1000
700
600 (Plastic)
850
3X1 + 4X2 2400 (Time)
1X1 + 1X2 700 (Limit) Redundant
1X1 - 1X2 350 (Mix)
X1, X2 0

900
800
700
600
500
400

Optimal solution determined by

Plastic and Time Constraints

300

and by X2 axis!

200
100
0
100

200

300

400

500

600

700

800

X1

Further Decreasing
the RHS for Plastic

X2
1000

Max 8X1 + 5X2

s.t. 2X1 + 1X2 1000
700
590 (Plastic)
600
850
3X1 + 4X2 2400 (Time)
1X1 + 1X2 700 (Limit) Redundant
1X1 - 1X2 350 (Mix)
X1, X2 0

900
800
700
600
500

Optimal Point now determined by the

plastic constraint and the X2-axis

400
300
200

The shadow prices

will now CHANGE

100
0
100

200

300

400

500

600

700

800

X1

Comparison With Excel

Here is the printout out of the sensitivity analysis
dealing with the objective RHS coefficients for
the original Galaxy Industries problem.

Shadow Price
for each constraint

Range of Feasibility is the range of

values that an RHS coefficient can
assume without changing the
shadow prices as long as no other
changes are made.

Range of Feasibility for RHS1

1000 400 1000 + 100
600
1100
Range of Feasibility for RHS2
2400 - 650 2400 + 100
1750

2500
Range of Feasibility for RHS3
700 20 700 +
680

Range of Feasibility for RHS4

350 390 350 +
- 40

Exact Meaning of Shadow Prices

A shadow price always means the amount the
objective function will change given a one unit
increase in the RHS value of a constraint.
But does this mean that this is the value (the most
you would be willing to pay) for an extra unit?
The answer depends on how the objective
function coefficients were calculated.
If the objective function coefficients did not take the
value of the resource into consideration, these are sunk
costs.
costs
Shadow price = the value of an extra unit of the resource.

If the objective function coefficients did take the value

of the resource into consideration, these are included
costs.
costs
Shadow price = a premium above the current price of the item
that one would be willing to pay for an extra unit.

EXAMPLE
Suppose the $8 objective function coefficient for dozens of
Space Rays and the $5 objective function coefficient for
dozens of Zappers were calculated as follows:
DOZ.
SPACE RAYS
$24

Selling Price
Costs
Plastic ($3/lb)
Other Variable Costs
Total Profit Per Dozen

DOZ.
ZAPPERS
$26

$ 6 (2 lbs.)
$10
$18
===========
$8

$ 3 (1 lb.)
==========
$ 5

Plastic is an included cost

Production time is a sunk cost

The $3.40 shadow price for plastic

means we would be willing to pay
up to $3.40 more than the current
price of $3 per pound (that is up to
$6.40/ lb.) for extra plastic.

It is not included in the objective

function coefficient calculation.
The $0.40 shadow price is the
value of an extra minute of
production time.

Complementary Slackness
Complementary slackness also holds for RHS
values. This property for RHS values states:
Complementary Slackness
For RHS Coefficients
For each constraint, either the slack
(difference between RHS LHS) is 0 or its shadow price will be 0.

Again, it can happen, that both are 0.

Plastic: Shadow Price 0; Slack = 1000-1000 = 0

Time:
Shadow Price 0; Slack = 2400-2400 = 0
Prod. Limit: Slack = 700-680 0; Shadow Price = 0
Prod. Mix: Slack = 350-(-40) 0; Shadow Price = 0

Review
Shadow price
Found by subtracting the original objective function
value from the objective function value with one more
unit of the resource on the RHS
Meaning
Included Cost
Sunk Cost

Range of Feasibility
Range of RHS value in which shadow price does not
change
The same constraints determine the optimal solution
in the range of feasibility

Complementary Slackness
Either the slack is 0 or the shadow price is 0