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1

A Geometric Programming Approach for The

Automotive Production in Turkey
Ersoy ÖZ and İbrahim GÜNEY

Abstract—Geometric Programming is an important class of nonlinear programming problems. And it is characterized by

objective and constraints that have a special form. There may be a nonlinear objective function and nonlinear constraints in a
Geometric Programming model. Nonlinear optimization models have been solved by different methods. Among them,
Geometric Programming is an efficient method for solving a particular type of nonlinear problems. Thus it may be advantageous
over linear programming. In this work, Cobb-Douglas production function is considered as a Geometric Programming model.
The 2009 production data of three automotive firms in Turkey are used in the model. The objective of the work is to estimate the
number of employees that will minimize the production costs, and the capital input, using Geometric Programming solution
method. For the estimations, ggplab toolbox that uses the interior-point algorithm and works under the Matlab software is used.

Index Terms—Constrained Optimization, Convex Programming, Nonlinear Programming, Optimization.

——————————  ——————————

1 INTRODUCTION

G EOMETRIC Program (GP) is a class of nonlinear

optimization with many useful theoretical and com-
putational properties. Although GP in standard
form is apparently a non-convex optimization problem, it
can be readily turned into a convex optimization prob-
lem, hence a local optimum is also a global optimum, the
duality gap is zero under mild conditions, and a global
optimum can be computed very efficiently. Convexity
and duality properties of GP are well understood, and
large-scale, robust numerical solvers for GP are available.
Furthermore, special structures in GP and its Lagrange
dual problem lead to computational acceleration, distri-
buted algorithms, and physical interpretations [13].
In 1961, Zener published a seminal paper [7] and ob-
served that some engineering design problems can be
formulated as optimization of ‘generalized polynomials’,
and that if the number of terms exceed the number of
variables by one, the optimal design can be found by
solving a system of linear equations. In 1967, Duffin, Pe-
terson, and Zener published the book [17] that started the
field of GP as a branch of nonlinear optimization. Several
important developments of GP took place in the late
1960s and 1970s. GP was tied with convex optimization
and Lagrange duality, and was extended to include more
general formulations beyond posynomials. Several nu-
merical algorithms to solve GP were proposed and tested.
And researchers in mechanical engineering, civil engi-
neering, and chemical engineering found successful ap-
plications of GP to their problems.
However, as researches felt that most of the theoretical,
algorithmic and application aspects of GP had been ex-
————————————————
 Ersoy ÖZ, Department of Technical Programs, Yildiz Technical Universi- firms TOFAŞ and OYAK-RENAULT were respectively
ty, Turkey.
 İbrahim GÜNEY, Department of Statistics, Istanbul Aydin University,
Turkey.
hausted by the early 1980s, the perid of 1980-1998 was
relatively quiet. Over the last few years, however, GP
started to receive renewed attention from the operations
research community. In particular, we now have very
efficient algorithms to solve GP, either by general pur-
pose convex optimization solvers or by more specialized
methods [12].
Production functions models can usually be expressed
and solved as GP models. The initial significant studies
on production functions are as follows: [11], [3], [8], [4],
[9], [1]. The Cobb-Douglas model which is taken as the
basis of this study is presented in [6].
Two of the best known production functions utilized
by economists are the so-called Leontief and Cobb-
Douglas functions. These functions are named after the
individuals mainly responsible for their popularization in
the economics literature. From a historical perspective,
they are interesting because they have been widely used
in both theoretical and empirical production analyses and
other fields of economics. However, their widespread use
in theoretical analysis only came about after their exten-
sive use in empirical analysis. As such, it represents an
excellent example of applied production analysts crystal-
lizing a means of research for the entire economics pro-
fession [16].
The Turkish automotive industry was first established
in the 1950s and the development of the sector occured
when the factories built in the late 1960s and the early
1970s have reached a certain capacity and proficiency
rate. The first production of automotive industry
products in Turkey was in 1954, made by Türk Willys
Overland Ltd. The first serious production of automobiles
started in 1966 with the Anadol automobile. Later on, the
effective in the development and strengthening of the
automotive industry in Turkey. Today, 15 main firms are
active in the sector and they significantly help the country
to develop with around 25.000 employment that they
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provide [24].
2 GEOMETRIC PROGRAMMING
2.1 Monomial and Posynomial Functions
Let x1,..., xn denote n real positive variables, and
x  ( x1,..., xn ) a vector with components xi . A real valued
function f of x , with the form
f ( x )  cx1a1 x2a2 ... xnan (1)
where c  0 and ai   , is called a monomial function.
Any positive constant is a monomial, as is any variable.
Monomial functions are closed under multiplication and
division. A monomial function raised to any power is also
a monomial function.
The term ‘monomial’ differs from the standard defini-
tion of ‘monomial’ used in algebra. In algebra a monomial
has the form (1), but the exponents ai must be nonnega-
tive integers, and the coefficient c is one. In this paper
the coefficient can be any positive number, and the expo-
nents can be any real numbers, including negative and
fractional.
A sum of one or more monomials, i.e., a function of the
form K
f ( x )   ck x1a1k x2a2 k ... xnank (2)
k 1
where ck  0 , is called a posynomial function [21].
2.2 Geometric Program
A GP is an optimization problem of the form
minimize f0 ( x )
subject to fi ( x )  1, i  1,..., m, (3)
g i ( x )  1, i  1,..., p,
where fi are posynomial functions, g i are monomials,
and xi are optimization variables. The problem (3) is a
geometric program in standard form. In a standard form
of GP, the objective must be posynomial function and it
must be minimized; the equality constraints can only
have the form of a monomial function equal to one, and
the inequality constraints can only have the form of posy-
nomial function less than or equal to one.
GP, a mathematical programming technique, provides
a powerful tool for solving nonlinear problems where
nonlinear relations can be well represented by exponen-
tial or power functions. Its attractive structural properties
as well as its elegant theoretical basis have led to a num-
ber of interesting engineering applications and the devel-
opment of numerous useful results. If the primal problem
is in a standard form of GP, then a minimizing solution to
that problem can be obtained by solving the dual max-
imization. This is because there is a strong duality theo-
rem for GP problems [22].
2.3 Solution of Geometric Program
The main motivation for GP modeling is the great effi-
ciency with which optimization problems of this special
form can be solved. To give a rough idea of the current
state of the art, standard interior-point algorithms can
solve a GP with 1000 variables and 10000 constraints in
2
under a minute, on a small desktop computer [20].
Interior-point methods for GPs are very robust. They
require essentially no algorithm parameter tuning, and
they require no starting point or initial guess of the op-
timal solution. They always find the (true, globally) op-
timal solution, and when the problem is infeasible (i.e.,
the constraints are mutually inconsistent), they provide a
certificate showing that no feasible point exists. General
methods for nonlinear programming (NLP) can be fast,
but are not guaranteed to find the true, global solution, or
even a feasible solution when the problem is feasible. An
initial guess must be provided, and can greatly affect the
solution found, as well as the solution time. In addition,
algorithm parameters in general purpose NLP solvers
have to be carefully chosen.
The main trick to solving a GP efficiently is to convert
it to a nonlinear but convex optimization problem, i.e., a
problem with convex objective and inequality constraint
functions, and linear equality constraints. Efficient solu-
tion methods for general convex optimization problems
are well developed [20].
For the model that is addressed in this study, ggplab
toolbox that uses the interior-point algorithm is used.
This toolbox works under the Matlab software [19].
3 THE MODEL
In much economic research dealing with issues of growth
and productivity, econometric analysis is done based on a
production function. The most commonly used produc-
tion function is the Cobb-Douglas. This incorporate capi-
tal and labor as the factor inputs which are usually consi-
dered the major resources in the production process. Oc-
casionally, capital and labor are supplemented by land,
materials or energy to attempt to complete the production
function [18].
The firm uses n inputs (labor, coal, iron, ore, etc.) to
produce a single output, let x be the column vector of
inputs,
x   ( x1,..., xn )
and let q be the output. The firm’s production function is
represented by
q  f ( x )  f ( x1,..., xn ) (4)
giving output as a function of its inputs. (4) assumes
nothing but the existence of a maximum output corres-
ponding to any combination of inputs.
Let r be a row vector of given prices of the inputs,
r  (r1, r2 ,..., rn )
and p the given price of the output.
A firm is in competitive situation if it can buy and sell
in any quantities at exogenously given prices, which are
independent of its production decisions. In other words,
the competitive firm is a price taker [14].
The firm benaves so as to maximize the profit  , given
as the difference between revenue, pq , and cost, given as
the total expenditure on all inputs,
n
rx   r j x j .
j 1
The problem of the (competitive) firm can then be
stated as the following mathematical programming prob-
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lem: TABLE 1
maximize x  ( x )  pf ( x )  rx VARIABLES AND PARAMETERS OF THE MODEL
subject to x  0.
Another version of this problem often used in produc-
tion theory is based on the assumption of the given out-
*
put level q . The firm is trying to minimize its cost, M , of
*
the inputs used to produce q . The expenditure of the
firm is given by
M  r1x1  r2 x2  ...  rn xn
and the mathematical programming problem is then
minimize x M ( x )
subject to f ( x )  q * and x  0. (5)

Closely interrelated to this formulation is the problem

of the firm with a given level of expenditure or prespeci-
*
fied budget, M , and an objective function that maximiz-
es the production q . Thus the firm chooses levels of in-
puts so as to maximize output, subject to a budget con-
straint:
maximize x f ( x )
(6)
subject to r1x1  r2 x2  ...  rn xn  M * and x  0.
For illustration of (5) and (6), we consider the technol-
ogy defined by the Cobb-Douglas production function
(with just two inputs):
q  f ( x1, x2 )  ax1 x2
with a  0,0    1, and 0    1.
In this case, (5) leads to the following mathematical pro-
gramming model:
minimize x1, x2 r1x1  r2 x2
(7)
subject to ax1 x2  q * and x1  0, x2  0.
*
It is to find, for a particular output level q and with a
given structure of input prices, what input levels would
constitute the cheapest way of producing this output and
what would be the minimum cost. This question can be
answered for all possible levels of output and the mini-
mum cost would be depend on the level of output to be
produced.
Assuming that the technology is defined by the Cobb-
Douglas production function, the solution of (7) will yield
the cost function C(r , q ) , expressing minimum cost as a
function of input prices r and output level q . A slight
modification of the constraint in (7) leads to the following
geometric programming problem:
minimize x1, x2 M ( x )  r1x1  r2 x2
q *   
subject to x1 x2  1 (8)
a
x1  0, x2  0.
The notations in Table 1 are the explanations of the pa-
rameters and variables in (8).
4 DATA
The data that will be used in the application belong to the
automotive companies that were producing in Turkey in
2009. From these companies, three of them that made the
most sale and that spent the most for crude material and
labor force are chosen. These companies are Ford Otosan,
Oyak Renault and Tofaş and they will be shown by F1, F2
and F3 respectively.
The data of price of labor input, output level,
employment of labor input and cost of inputs used to
produce q * are taken from [2]. The capital input values
are taken from [10] for F1, from [15] for F2 and from [23]
for F3. Capital input values are the issued capitals of the
respective firms. Price of capital inputs values are
weighted avarege interest rates for deposits and corres-
pond to the price of capital. This data is taken from [5].
TABLE 2
INPUT DATA FOR THE MODEL
TL: Turkish Lira
The notations in Table 1 are the explanat
In economy, any produced production tool is capital
which is a factor that carries out production. The capital
factor helps people during the production process and
increases efficiency. The capital, as a production factor,
covers physical capital goods. Along with this, the
present monetary capital is not involved in physical
production but is used to obtain the phsyical capital.
The activities that an enterprice carries out to renew or
increase its equipment are called “investment”. The
payments made to organizations or individuals in
exchange of the provided finance to accomplish these
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activities are called ‘interest’. This shows that the interest
is the price of capital.
5 APPLICATION
GP is a nonlinear programming problem which might
have nonlinear objective and constraint functions. The
model analysed in this study is Cobb-Douglas model
which is the basis of production functions. In economics,
the Cobb-Douglas functional form of production func-
tions is widely used to represent the relationship of an
output to inputs. For this model the objective function is a
posynomial function which contains two monomial
terms. The first constraint function in (8) is:
q *   
x1 x2  1
a x1  Automotive Industry Employment
and the second constraint function is:
x1  Automotive Industry Employment.
The second constraint is used for the purpose of model’s
consistency. The data to be used in the model might have
9-10 digits, therefore all the data is used by their loga-
rithms. The variables and parameters in the model set up
as shown below:
minimize x1, x2 M ( x )  r1x1  r2 x2
q *   
subject to x1 x2  1
a (9)
x1  Automotive Industry Employment
x1  0, x2  0
are r1 value which refers to the logarithm of the price of
labor input, r2 value which refers to the logarithm of the
price of capital input and q * value which refers to the
logarithm of the output levels. The parameter of a (Total
Factor Productivity) in constraint is taken as 1. Besides
the value of the automotive industry employment is de-
termined as of a minimum of 5000.
The values of  ,  , x1 , x2 and M are estimated for
F1, F2 and F3 by using the data and the model in (9). As
mentioned above, ggplab toolbox that works under the
Matlab software is used for calculating algorithms. The
results obtained are in Table 3.
TABLE 3
ESTIMATED VALUES
The comparison of x1 , x2 and M estimated values
and the logarithms of the actual values are in Table 4.
4
TABLE 4
THE COMPARISON OF THE ESTIMATED AND ACTUAL VALUES
6 RESULTS AND CONCLUSION
The estimated x1 values for all of the three firms is 3.70
because of the following constraint in the model:
If this constraint had not been added to the model, the
x1 values would have been much below 3.70. As a result,
realistic results would not have been obtained. The esti-
mated x2 values are very close to the actual x2 values.
However estimated M values are very different than the
actual M values.
The Cobb-Douglas production function that is ana-
lysed in this study, gives consistent results except for M (
the cost of inputs used to produce q * ) values, in the light
of the existing data. The reason of the inconsistency of the
M values is that there are too many parameters which
explain the objective value and that these parameters are
not existent in the model. The parameters that determine
the value of the objective function are r1 , r2 and the va-
riables are x1 , x2 . However, the number of the parame-
ters and variables for producing q * are too many. Thus, it
is obvious that there would be more consistent results if
the objective and constraint functions could be revised as
including more parameters and values.
The successful results that are obtained in this study by
GP solving method of the Cobb-Douglas production func-
tion will contribute to further studies in this realm.
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Ersoy ÖZ has obtained his Ph.D. degree in Operations Research at

Marmara University in Turkey in 2009. His works are about markov
chains, hidden markov models and geometric programming. He is
lecturer in the Computer Programming department at Yildiz Technic-
al University.

İbrahim GÜNEY has obtained his Ph.D. degree in Applied Mathe-

matics at Uludag University in Turkey in 1991, associate professor
degree in Statistics in 2002 and professor degree in 2008. His works
are about statistical shape analysis, correspondence analysis, statis-
tical manifolds and geometric programming. He is professor in the
Statistics department at Istanbul Aydin University.