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September 2, 2016

1. A small pet food company has a contract to supply 800 pounds of dog food per week to a

kennel. The food must provide minimal percentages of 3 nutritional components, A, B, and

C as given:

A

12

B

7

C

9

The company makes the dog food by combining various meat by-products; some of these

have weekly quantity limits. The availabilities, costs, and nutritional percentages are:

By-product

1

2

3

4

5

supply (lbs/wk)

500

400

unlimited

300

100

cost (/lb)

43

39

42

34

25

A

5

4

8

3

0

B C

0 4

10 3

7 4

10 5

9 6

Formulate a model that achieves the desired mix at minimal cost. Do not solve the problem;

carefully define your variables.

Solution: Since the company makes 800 pounds per week, we can immediately translate

the minimal percentages of A, B, and C into pounds required of each: .12(800)=96 of A,

.07(800)=56 of B, and .09(800)=72 of C. Let xi = # of pounds of meat product i used per

week, i = 1, . . . , 5. Then the LPP is:

Minimize (cost in cents) 43x1 + 39x2 + 42x3 + 34x4 + 25x5 subject to

5x1 +4x2 +8x3 +3x4

96

10x2 +7x3 +10x4 +9x5

56

4x1 +3x2 +4x3 +5x4 +6x5

72

x 1 , x2 , x3 0

2. A recent retiree plans to purchase some bonds to be used to meet some annual expenditures. A bond has a given face value, price, maturity year, and interest rate (called the

coupon rate). At the end of each year until it matures, each share of the bond generates

a payment, called the coupon, that is equal to the coupon rate times the face value. At

1

the end of the maturity year, the face value is also repaid by the bond issuer to the bond

purchaser. (After the maturity year, the bond generates no money.) The price is, of course,

what must be paid to purchase one share of the bond.

Suppose the retiree decides she needs at least $40,000 at the end of the first year, at least

$50,000 at the end of the second year, and at least $36,000 at the end of the third year.

There are 4 dierent bonds that she considers purchasing. Their face values, prices, coupon

rates, and maturity years are:

bond

face value

price

coupon rate

maturity year

1

200

204

5%

1

2

120

118

3.5%

2

3

60

57

1.5%

2

4

80

81

4%

3

Set up a model to determine what she should do about bond purchases. Assume its possible

to buy partial shares of a bond. Clearly define any variables used. Do not (yet) solve the

problem, just formulate the model.

Solution: Let xi =# of shares of bond i purchased, i = 1, . . . , 4. She wants to minimize

total purchase cost, subject to meeting her yearly requirements. Thus:

Minimize 204x1 + 118x2 + 57x3 + 81x4 subject to

(1.05)200x1 + (.035)120x2 + (.015)60x3 + (.04)80x4 40, 000

(1.035)120x2 + (1.015)60x3 + (.04)80x4 50, 000

(1.04)80x4 36, 000

x1 , . . . , x 4 0

The constraints are equivalently written:

210x1 + 4.2x2 + .9x3 + 3.2x4 40, 000

124.2x2 + 60.9x3 + 3.2x4 50, 000

83.2x4 36, 000

x1 , . . . , x 4 0

3. Do problem #10 in 2.3. Formulate the problem and solve it graphically.

Solution: There are several ways to model and solve this problem. If we were simply setting

up a model, the easiest formulation might be to let x1 be the number of frames that are

2

made, x2 the number that are purchased, and x3 the number of cabinets that are installed.

Of course, the number of frames made plus the number bought must equal the number of

cabinets installed and the linear programming problem is:

Maximize 100x3

5x3

3x3

x1

17x1

27x2 subject to

+ 2x1 1750

+ x1

1032

+ x2

= x3

x 1 , x2 , x3 0

Now, to solve this graphically, we need to express this in terms of two variables only; this is

easy to do since x1 + x2 = x3 . One solution then is to replace x3 wherever it appears with

x1 + x2 , leading to the following problem, in which Ive simplified expressions (for example

55(x1 + x2 ) 17x1 27x2 = 38x1 + 28x2 ).

Maximize 38x1 + 28x2 subject to

7x1

4x1

+5x2

+3x2

x 1 , x2

1750

1032

0

350

300

250

200

150

100

50

50

100

150

200

250

The feasible region (shaded) is bounded and so the maximum must exist and occur at one

of the corner points, which are (0, 344), (90, 224), and (250, 0). Evaluating 3x1 + 28x2 at

these points yields 9632, 9692, and 9500, respectively, so the optimal solution is x1 = 90

and x2 = 224. That is, make 90 frames in the shop and purchase 224; use these to install

90 + 224 = 314 cabinets, for a profit of $9692.

An alternate approach is to use variables x1 = number of frames that are made and x3 the

number of cabinets installed. Since x2 = x3 x1 is the number of frames purchased, we can

replace x2 in the three variable model with x3 x1 everywhere that it appears, including the

constraint x2 0. The replacement here yields x3 x1 (this is natural- think about what

this means!) and so this constraint must be included. The model is then:

Maximize 10x1 + 28x3 subject to

2x1

x1

x1

+5x3

+3x3

+x3

x 1 , x3

1750

1032

0

0

The graphical solution (not shown here) will have a dierent looking feasible region and

corner points (dierent variables!) but will have a maximum profit of $9692 as well, with

x1 = 90 and x3 = 314. That is, install 314 cabinets, for which 90 frames will be made in the

shop; of course, this implies that 224 frames will be purchased.

As I mentioned in class, I plan to cover most of the the theory and applications of 2 person

zero-sum game theory, largely through mini-explanations, readings in the text, and problems

on homework assignments. Well cover most of chapter 9 in Thie and Keough. A nice source

(though not necessary to read) is a great set of online notes by Thomas Ferguson (google

thomas ferguson ucla). A fun book, available cheaply through Dover press and free online, is

The Compleat Strategyst, by J.D. Williams. This was the first book on game theory written

for a general audience and assumed little mathematical knowledge. Written in 1954, its

hilarious, though, fortunately, weve advanced beyond the 1954 social norms in a number of

examples.

In a 2 person zero-sum game between Player 1 (P1) and Player 2 (P2), P1 has m possible

strategies: s1 , s2 , . . . , sm and P2 has n possible strategies t1 , t2 , . . . , tn . If P1 uses si and P2

uses tj , then the payo to P1 is denoted aij ; this could be positive, negative, or 0. The

payo to P2 is aij . (The payo to P1 plus the payo to P2 is 0; this is the meaning of

zero-sum.) The payo matrix A is the m n matrix with entry aij in row i and column j.

(Thus, the rows correspond to P1 strategies and the columns to those of P2.) Neither player

knows which strategy the other player will use. For example, let

4

3

4

7 5

6

3

4

A= 2

5

Then P1 has three strategies: s1 , s2 , s3 and P2 has the two strategies t1 , t2 . Suppose P1 plays

s2 . If P2 uses t1 , then P1 wins 2 and P2 wins -2 (that is, loses 2). If P2 instead uses t2 , then

P1 wins -7 and P2 wins 7.

4. In the classic game paper, scissors, rock, two people simultaneously show each other the

sign for paper, for scissors, or for rock. Scissors beats paper (ouch!), paper beats rock (by

covering it), and rock beats scissors (ouch! again). The winner gets $2 for each play. If the

strategies for both players are listed in the order paper, scissors, rock, write the corresponding

payo matrix.

2

0

2

2

2

0

2

3

2

2 5

0

5. Joe and Mary simultaneously each call out one of 1, 2, or 3. If the sum is odd, Joe wins;

if its even, Mary wins. The amount the loser pays to the winner is the sum in $. Order the

strategies and write the corresponding payo matrix.

Solution: Let the strategies for2both players be3ordered as choose 1, choose 2, choose 3.

2

3

4

4

5 5

Then the payo matrix is: A = 4 3

4

5

6

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