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Duality and Sensitivity Analysis

Merton Trucks
Model 101 Contribution Eng. Assy. Metal Stmp. 101 Assy. 102 Assy $3000 1 2 2 3 Model 102 $5000 2 2 4000 6000 5000 4500 Availability

Optimal Product Mix: 2000 Model 101s and 1000 Model 102s Optimal Contribution: $11,000,000 How much is Engine Assembly capacity worth to Merton Trucks? Increase the Engine capacity availability by 1, and resolve. The difference in the total contribution = worth of capacity/unit = $2000/hr

Merton Trucks (Scaled)

Model 101 Contribution Eng. Assy. Metal Stmp. 101 Assy. 102 Assy $3000 1/4000 unit 2/6000 unit 2/5000 unit 3/4500 unit Model 102 $5000 2/4000 unit 2/6000 unit 1 unit 1 unit 1 unit 1 unit
unit = 4000 hr unit = 6000 hr unit = 5000 hr unit = 4500 hr

Availability

Optimal Product Mix: 2000 Model 101s and 1000 Model 102s Optimal Contribution: $11,000,000 How much is Engine Assembly capacity worth to Merton Trucks? Increase the Engine capacity availability by 1, and resolve. The difference in the total contribution = worth of capacity/unit = 1 million/unit = 1 million/4000 hr = $250/hr
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Worth of Engine Capacity

% Increase Original 0.5% increase 1% increase 5% increase 10% increase Contribution $11 000 000 $11,000,000 $11,040,000 $11,080,000 $11,400,000 $11,800,000 $2000.00 $2000.00 $2000.00 $2000.00 Worth (per hour Capacity)

Merton Trucks
Engine Assembly Capacity is now 4400 hours

Model 101 Contribution Eng. Assy. Metal Stmp. 101 Assy. 102 Assy $3000 1 2 2

Model 102 $5000 2 2 3

Availability 4400 6000 5000 4500

Optimal Product Mix: 1600 Model 101s and 1400 Model 102s Optimal Contribution: $11,800,000 How much is Engine Assembly capacity worth to Merton Trucks?
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Worth of Engine Capacity

Engine Assembly Capacity is now 4400 hours

% Increase Original

Contribution $11 800 000 $11,800,000

Worth (per hour Capacity)

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Worth of Engine Capacity

Engine Assembly Capacity is now 4400 hours

% Increase Original 0.5% increase

Contribution $11 800 000 $11,800,000 $11,844,000

Worth (per hour Capacity) $2000.00

Worth of Engine Capacity

Engine Assembly Capacity is now 4400 hours

% Increase Original 0.5% increase 1% increase

Contribution $11 800 000 $11,800,000 $11,844,000 $11,888,000

Worth (per hour Capacity) $2000.00 $2000.00

Worth of Engine Capacity

Engine Assembly Capacity is now 4400 hours

% Increase Original 0.5% increase 1% increase 5% increase

Contribution $11 800 000 $11,800,000 $11,844,000 $11,888,000 $12,000,000

Worth (per hour Capacity) $2000.00 $2000.00 $909.09

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Worth of Engine Capacity

Engine Assembly Capacity is now 4400 hours

% Increase Original 0.5% increase 1% increase 5% increase 10% increase

Contribution $11 800 000 $11,800,000 $11,844,000 $11,888,000 $12,000,000 $12,000,000

Worth (per hour Capacity) $2000.00 $2000.00 $909.09 $454.55

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Merton Trucks

Engine Assembly capacity = 4000 hrs

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Merton Trucks

Engine Assembly capacity by 1%

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Merton Trucks

Engine Assembly capacity by 5%

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Merton Trucks

Engine Assembly capacity by 10%

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Merton Trucks (new)

Engine Assembly capacity = 4400 hrs

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Merton Trucks (new)

Engine Assembly capacity by 1%

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Merton Trucks (new)

Engine Assembly capacity by 5%

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Merton Trucks (new)

Engine Assembly capacity by 10%

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Forming the Dual

Primal in standard form
Max c1 x1 + c 2 x 2 + ... + c n x n s.t. a 11 x 1 + a 12 x 2 + ... + a 1 n x n b1
a 21 x 1 + a 22 x 2 + ... + a 2 n x n b 2 ... ... ... ... ... ... ... ... a m 1 x 1 + a m 2 x 2 + ... + a mn x n b m x 1 , x 2 ,..., x n 0

Dual in standard form

Min b1 y1 + b 2 y 2 + ... + b m y m s.t. a 11 y 1 + a 21 y 2 +L + a m 1 y m c 1

a 12 y 1 + a 22 y 2 +L + a m 2 y m c 2 ... ... ... ... ... ... ... ... a 1 n y 1 + a 2 n y 2 +L + a mn y m c n y1 , y 2 , K , y m 0

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Forming the Dual

Input (Primal in standard form):
{ { {

Maximization objective Non-negative decision variables Less than or equal to () type constraints

Output (Dual):
{ { { { {

Minimization objective One dual variable for each primal constraint Non-negative dual variables Greater than or equal to () type constraints One constraint for each primal variable
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Forming the Dual

Input (Primal in standard form):
{ { {

Minimization objective Non-negative decision variables Greater than or equal to () type constraints

Output (Dual):
{ { { { {

Maximization objective One dual variable for each primal constraint Non-negative dual variables Less than or equal to () type constraints One constraint for each primal variable
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Primal in non-standard form

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Primal-Dual Relationship
Primal Problem Objective: Max Constraint i : <= form = form >= form Variable j: xj >= 0 xj urs xj <= 0 Dual Problem Objective: Min Variable i : yi > >= 0 yi urs yi <= 0 Constraint j: >= form = form <= form
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Primal in non-standard form

Max 2 0 x1 + 3 0 x 2 + 2 5 x3 + 4 0 x 4 s.t. 5 x1 + 3 x 2 5 x3 + 3 x 4 25
9 x1 4 x 2 + 8 x3 4 x 4 10 2 x1 7 x 2 6 x3 + 5 x 4 = 15 x1 , x1 0, x3 free, x 4 0

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Dual for non-standard Primal

Min s.t.
25 y 1 + 10 y 2 + 15 y 3 5 y 1 + 9 y 2 + 2 y 3 20 3 y 1 4 y 2 7 y 3 30 5 y 1 + 8 y 2 6 y 3 = 25 3 y 1 4 y 2 + 5 y 3 40 y 1 0 , y 2 0 , y 3 free
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Primal-Dual Example
Primal Dual

Max 2 0 x1 + 3 0 x 2 + 2 5 x 3 + 4 0 x 4 Min 25 y 1 + 10 y 2 + 15 y 3 s.t. 5 x1 + 3 x 2 5 x 3 + 3 x 4 25 s.t. 5 y 1 + 9 y 2 + 2 y 3 20

9 x1 4 x 2 + 8 x 3 4 x 4 10 2 x1 7 x 2 6 x 3 + 5 x 4 = 15 x1 , x1 0 , x 3 free, x 4 0
3 y 1 4 y 2 7 y 3 30 5 y 1 + 8 y 2 6 y 3 = 25 3 y 1 4 y 2 + 5 y 3 40 y 1 0 , y 2 0 , y 3 free
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Primal in non-standard form

max Z = 5x1 + 4 x 2
x

3 x1 + 8 x 2 6 x1 + 6 x2 = 5 8 x1 = 10 x 2 0; x1 urs
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Dual for non-standard Primal

min w = 6 y1 5 y2 + 10 y3
y

3 y1 + y2 + 8 y3 = 5 8y1 + 6 y2 y1 0; y2 , y3 urs
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Shadow Price

Shadow Price of a Resource: Price of selling an infinitesimal quantity of that resource. Also Shadow Price of a Resource: Price of buying an infinitesimal quantity of that resource. Generally, both are equal, except when the optimal solution is degenerate. Read the documentation to interpret the meaning in case of a degenerate optimal solution.

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Shadow Price
Max x1 + x 2 s.t. x1 1
x2 1 x1 + x 2 2 x1 , x1 0
What is special about this optimal solution? What is the price of buying an infinitesimal quantity of the resource represented by X1 + X2 2?
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X1 =1

Optimal X2 =1 1 X1 + X2 =2

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Shadow Price
Max x1 + x 2 s.t. x1 1
x2 1 x1 + x 2 2 x1 , x1 0
X1 =1

Optimal X2 =1 1 X1 + X2 =3

What is the price of buying an infinitesimal quantity of the resource represented by X1 + X2 2?

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Shadow Price
Max x1 + x 2 s.t. x1 1
x2 1 x1 + x 2 2 x1 , x 2 0
X1 =1

Optimal X2 =1 1 X1 + X2 =1.5

What is the price of selling an infinitesimal quantity of the resource represented by X1 + X2 2?

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Using MS Excel Solver

Advertised: Shadow prices denote the rate of increase in objective function values when the right hand side of the constraint is increased by a small amount At degenerate solutions, this is not the full answer. Do not trust Excel Sensitivity Report if your solution happens to be degenerate! Use your judgment to interpret the values you get according to the context.

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Laws of Duality
Strong Law of Duality:
o If the primal problem has a finite optimum, then at optimal solution: Objective value of Primal = Objective value of Dual Primal Unbounded Primal Infeasible Dual Infeasible Dual Unbounded or Infeasible

o o

Obj value of any non-optimal feasible solution for the Minimization problem Primal Obj at optimality = Dual Obj at Optimality Obj value of any non-optimal feasible solution for the Maximization problem

Weak Law of Duality: Each feasible solution for the primal (maximization) problem has an objective value that is less than or equal to the objective value 34 of every feasible solution to the dual (minimization) problem.

Complementary Slackness
Consider an optimal solution to the primal problem.
{

If a constraint is non-binding at the solution, i.e., has a strictly positive slack, then the dual variable (shadow price) corresponding to that constraint has a zero value in the optimal solution to the dual. If the dual variable (shadow price) corresponding to a particular constraint has a strictly positive value in an optimal solution to the dual, then the constraint is binding at an optimal solution to the primal problem.

Slack Shadow Price = 0

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Complementary Slackness
Slack in Primal Constraint Positive Positive Zero Zero Corresponding shadow price Positive Zero Positive Zero Allowed? Not Allowed Allowed Allowed Allowed

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Complementary Slackness
Slack in Primal Constraint Positive Positive Zero Zero Corresponding shadow price Positive Zero Positive Zero Allowed? Not Allowed Allowed Allowed Allowed

Notice that complementary slackness is valid ONLY at an optimal solution.

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Reduced Costs
The reduced cost of a coefficient of a decision variable in the objective function is the minimum amount by which the coefficient should be reduced in order that the decision variable achieves a non-zero level in an optimal solution.

What is the reduced cost for a decision variable already at non-zero value in an optimal solution? For a minimization problem, reduced costs are either ZERO or ? For a maximization problem, reduced costs are either ZERO or ? Can a decision variable at zero level have a reduced cost of zero?
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Reduced Costs
Min x1 + x 2 s.t. x1 + x 2 1
x1 , x1 0
X1 + X2 =1

O ti l Optimal

X1 + X2

An optimal solution: (x1, x2) = (1, 0) What is the reduced cost of x2?
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Sensitivity Analysis
Sensitivity analysis tells us the maximum amount by which we can change any of the coefficients in a linear program such that the set of constraints that determine an optimal solution g does not change.
{ We are concerned with changing only one coefficient and keeping all others fixed. We are bothered only about the set of constraints that define the optimal solution they should not change. But, the optimal solution can change, the objective function value can change.

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Sensitivity Analysis
Optimum Value = 11 Million Model_101 = 2000 Model_102 = 1000

Original Model
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Sensitivity Analysis
Optimum Value = 13 Million Model_101 = 2000 Model_102 = 1000

Objective function coefficient increases Z = 3000 Model_101 + 5000 Model_102 to Z = 4000 Model_101 + 5000 Model_102 42

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Sensitivity Analysis
Optimum Value = ??? Model_101 = 2000 Model_102 = 1000

Objective function coefficient increases Z = 3000 Model_101 + 5000 Model_102 to Z = 6000 Model_101 + 5000 Model_102 43

Sensitivity Analysis
Optimum Value = 17.5 Million Model_101 = 2000 Model_102 = 1000

Objective function coefficient increases Z = 3000 Model_101 + 5000 Model_102 to Z = 6000 Model_101 + 5000 Model_102 44

Sensitivity Analysis
Optimum Value = 11 Million Model_101 = 2000 Model_102 = 1000

Original Model
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Sensitivity Analysis
Optimum Value = 10.5 Million Model_101 = 2000 Model_102 = 1000

Objective function coefficient decreases Z = 3000 Model_101 + 5000 Model_102 to Z = 2750 Model_101 + 5000 Model_102 46

Sensitivity Analysis
Optimum Value = 9 Million Model_101 = 2000 Model_102 = 1000

Objective function coefficient decreases Z = 3000 Model_101 + 5000 Model_102 to Z = 2000 Model_101 + 5000 Model_102 47

Sensitivity Analysis
Optimum Value = 9.5 Million Model_101 = 1000 Model_102 = 1500

Objective function coefficient decreases Z = 3000 Model_101 + 5000 Model_102 to Z = 2000 Model_101 + 5000 Model_102 48

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Sensitivity Analysis

Objective function coefficient change

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Sensitivity Analysis
Optimum Value = 11 Million Model_101 = 2000 Model_102 = 1000

Original Model
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Sensitivity Analysis
Optimum Value = 11.4 Million Model_101 = 1800 Model_102 = 1200

Engine Assy. RHS increases Model_101 + 2 Model_102 4000 to Model_101 + 2 Model_102 4200

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Sensitivity Analysis
Optimum Value = 12 Million Model_101 = 1500 Model_102 = 1500

Engine Assy. RHS increases Model_101 + 2 Model_102 4000 to Model_101 + 2 Model_102 4600

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Sensitivity Analysis
Optimum Value = 11 Million Model_101 = 2000 Model_102 = 1000

Original Model
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Sensitivity Analysis
Optimum Value = 10.6 Million Model_101 = 2200 Model_102 = 800

Engine Assy. RHS decreases Model_101 + 2 Model_102 4000 to Model_101 + 2 Model_102 3800

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Sensitivity Analysis
Optimum Value = 9 Million Model_101 = 2500 Model_102 = 300

Engine Assy. RHS decreases Model_101 + 2 Model_102 4000 to Model_101 + 2 Model_102 3100

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Sensitivity Analysis

Engine Assy. RHS change

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