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# Operations Research Operations Research in North America, South Africa and Australia, and Operational Research in Europe, is an interdisciplinary

branch of applied mathematics and formal science that uses methods such as mathematical modeling, statistics, and algorithms to arrive at optimal or near optimal solutions to complex problems. It is typically concerned with optimizing the maxima (profit, assembly line performance, crop yield, bandwidth, etc) or minima (loss, risk, etc.) of some objective function. Operations research helps management achieve its goals using scientific methods. Some of the primary tools used by operations researchers are statistics, optimization, probability theory, queuing theory, game theory, graph theory, decision analysis, and simulation. Because of the computational nature of these fields, OR also has ties to computer science, and operations researchers use custom-written and off-the-shelf software. Operations research is distinguished by its frequent use to examine an entire management information system, rather than concentrating only on specific elements (though this is often done as well). An operations researcher faced with a new problem is expected to determine which techniques are most appropriate given the nature of the system, the goals for improvement, and constraints on time and computing power. For this and other reasons, the human element of OR is vital. Like any other tools, OR techniques cannot solve problems by themselves.

determining the routes of school buses (or city buses) so that as few buses are needed as possible designing the layout of a computer chip to reduce manufacturing time (therefore reducing cost) managing the flow of raw materials and products in a supply chain based on uncertain demand for the finished products efficient messaging and customer response tactics robotizing or automating human-driven operations processes globalizing operations processes in order to take advantage of cheaper materials. intermodal freight transport) • • • • • • • • • • .e. labor. land or other productivity inputs managing freight transportation and delivery systems (Examples: LTL Shipping. allocation problems.Scope of operations research Examples of applications in which operations research is currently used include: • critical path analysis or project planning: identifying those processes in a complex project which affect the overall duration of the project designing the layout of a factory for efficient flow of materials constructing a telecommunications network at low cost while still guaranteeing QoS (quality of service) or QoE (Quality of Experience) if particular connections become very busy or get damaged Road traffic management and 'one way' street allocations i.

Scientists in the United Kingdom including Patrick Blackett. sports events and their television coverage o • blending of raw materials in oil refineries Operations research is also used extensively in government where evidence-based policy is used. C. H. The modern field of operations research arose during World War II.• scheduling: o o o o personnel staffing manufacturing steps project tasks Network data traffic: these are known as queuing models or queuing systems. History Some say that Charles Babbage (1791-1871) is the "father of operations research" because his research into the cost of transportation and sorting of mail led to England's universal "Penny Post" in 1840. After the war it began to be applied to similar problems in industry . and studies into the dynamical behavior of railway vehicles in defense of the GWR's broad gauge. Cecil Gordon. Owen Wansbrough-Jones and Frank Yates. and in the United States with George Dantzig looked for ways to make better decisions in such areas as logistics and training schedules. Waddington.

It was also argued that small convoys would be harder for German U-boats to detect. but while the principle of using warships to accompany merchant ships was generally accepted. Convoys travel at the speed of the slowest member. therefore. Blackett's team instead made the surprising and counter-intuitive recommendation that the armor be placed in the areas which were completely untouched by damage in the bombers which returned. . Blackett's team analyzed a report of a survey carried out by Command. Their conclusion. Their suggestion to remove some of the crew so that an aircraft loss would result in fewer personnel loss was rejected by RAF command. On the other hand. All damage inflicted by German air defenses was noted and the recommendation was given that armor is added in the most heavily damaged areas. would result in the loss of the aircraft. if hit. The untouched areas of returning aircraft were probably vital areas. was that a few large convoys are more defensible than many small ones. which. Britain introduced the convoy system to reduce shipping losses. Blackett's staff showed that the losses suffered by convoys depended largely on the number of escort vessels present. Bomber Command inspected all bombers returning from bombing raids over Germany over a particular period. since it only included aircraft that returned to Britain. large convoys could deploy more warships against an attacker. so small convoys can travel faster. it was unclear whether it was better for convoys to be small or large. In another piece of work. For the survey. They reasoned that the survey was biased. rather than on the overall size of the convoy.World War II Blackett's team made a number of crucial analyses which aided the war effort.

The ratio of 60 mines laid per ship sunk was common to several campaigns: German mines in British ports. By comparing the number of flying hours put in by Allied aircraft to the number of U-boat sightings in a given area. Operations research doubled the on-target bomb rate of B-29s bombing Japan from the Marianas Islands by increasing the training ratio from 4 to 10 percent of flying hours. Operations research doubled the success rate of aerial attacks on submarines by recommending a shallower detonation setting on the depth charges being dropped by aircraft. it was realized that if the RAF bombers were to fly in a bomber stream they could overwhelm the night fighters who flew in individual cells directed to their targets by ground controllers. The "exchange rate" ratio of output to input was a characteristic feature of operations research. but submarines were unable to reach that depth in the limited time available after being spotted by the aircraft. British mines on German routes. The depth charges had previously been set to detonate at the depth where the shock of the explosion would be most efficiently transferred through the water.When the Germans organized their air defenses into the Kammhuber Line. It was then a matter of calculating the statistical loss from collisions against the statistical loss from night fighters to calculate how close the bombers should fly to minimize RAF losses. Comparison of exchange rates established "effectiveness ratios" useful in planning. and United States mines in Japanese routes. it was possible to redistribute aircraft to more productive patrol areas. Shallower detonation depth settings reduced the distance of the detonation from the submarine: a close detonation with lower shock transmission efficiency was more destructive than a more distant detonation with better transmission. revealed that .

and no player has anything to gain by changing only his or her own strategy (i. by changing unilaterally). the Nash equilibrium (named after John Forbes Nash. can I benefit by changing my strategy?" . and the introduction of computer data collection and processing has relieved analysts of much of the more mundane labor. revealed that glossy enamel paint was more effective camouflage for night fighters than traditional dull camouflage paint finish. Some of the important Theories used in Operation Research Nash equilibrium In game theory. but "OR" is the common abbreviation everywhere.wolf-packs of three United States submarines were the most effective number to enable all members of the pack to engage targets discovered on their individual patrol stations.. It is known as "operational research" in the United Kingdom (and "operational analysis" within the UK military and UK Ministry of Defense. OR is no longer limited to only operations. and the smooth paint finish increased airspeed by reducing skin friction. then the current set of strategy choices and the corresponding payoffs constitute Nash equilibrium. in which each player is assumed to know the equilibrium strategies of the other players. where OR stands for "Operational Requirement") and as "operations research" in most other English-speaking countries. If each player has chosen a strategy and no player can benefit by changing his or her strategy while the other players keep theirs unchanged. With expanded techniques and growing awareness. In other words.e. to be Nash equilibrium. who proposed it) is a solution concept of a game involving two or more players. and treating the strategies of the other players as set in stone. each player must answer negatively to the question: "Knowing the strategies of the other players.

Likewise. The Nash equilibrium may sometimes appear non-rational in a third-person perspective. If any player would want to do something different after being informed about the others' strategies. and Bill is making the best decision he can. If. taking into account the decisions of the others.g. however. one can imagine that each player is told the strategies of the other players. in many cases all the players might improve their payoffs if they could somehow agree on strategies different from the Nash equilibrium (e. For such games the Sub game perfect Nash equilibrium may be more meaningful as a tool of analysis.Stated simply. then that set of strategies is not Nash equilibrium. taking into account Bill's decision. a set of strategies is Nash equilibrium if no player can do better by unilaterally changing his or her strategy. The Nash-equilibrium may also have non-rational consequences in sequential games because players may "threat" each other with non-rational moves. Nash equilibrium does not necessarily mean the best cumulative payoff for all the players involved. This is because it may happen to be that Nash equilibrium is not Pareto optimal. the player does not want to switch (or is indifferent between switching and not) then the set of strategies is a Nash equilibrium. However. As a heuristic. taking into account Amy's decision. . many players are in Nash equilibrium if each one is making the best decision that they can. Amy and Bill are in Nash equilibrium if Amy is making the best decision she can. competing businessmen forming a cartel in order to increase their profits Definition Informal definition Informally.

fn(x)) is the payoff function.. .admits at least one Nash equilibrium. A strategy profile x* S is a Nash equilibrium (NE) if no unilateral deviation in strategy by any single player is profitable for that player. then the equilibrium is classified as a strict Nash equilibrium.. Let x-i be a strategy profile of all players except for player i. . When each player i {1.Formal definition Let (S. then the equilibrium is classified as a weak Nash equilibrium.... S=S1 X S2 .. there is exact equality between and some other strategy in the set S.. f) be a game. If instead. xn) then player i obtains payoff fi(x). where Si is the strategy set for player i.e. for some player. i. . that is A game can have a pure strategy NE or an NE in its mixed extension (that of choosing a pure strategy stochastically with a fixed frequency).. n} chooses strategy xi resulting in strategy profile x = (x1. . Note that the payoff depends on the strategy profile chosen. on the strategy chosen by player i as well as the strategies chosen by all the other players. X Sn is the set of strategy profiles and f=(f1(x). Nash proved that.. When the inequality above holds strictly (with > instead of ) for all players and all feasible alternative strategies.. then every n-player game in which every player can choose from finitely many strategies . if we allow mixed strategies (players choose strategies randomly according to pre-assigned probabilities)..

zero-sum game with finite strategies. the best payoff possible for player 1 is V.Game theory In the theory of simultaneous games. In zero-sum games. This theorem was established by John von Neumann. See Sion's minimax theorem and Parthasarathy's theorem for generalizations. Equivalently. who is quoted as saying "As far as I can see. see also example of a game without a value. such that (a) Given player 2's strategy. The name minimax arises because each player minimizes the maximum payoff possible for the other--since the game is zero-sum. Minimax theorem The minimax theorem states: For every two-person. the minimax solution is the same as the Nash equilibrium. Player 1's strategy guarantees him a payoff of V regardless of Player 2's strategy. he also maximizes his own minimum payoff. there exists a value V and a mixed strategy for each player. a minimax strategy is a mixed strategy which is part of the solution to a zero-sum game. and (b) Given player 1's strategy. and similarly Player 2 can guarantee himself a payoff of -V. there could be no theory of games … without that theorem … I thought there was nothing worth publishing until the Minimax Theorem was proved". the best payoff possible for player 2 is -V. .

. In a zero-sum game.Maximin Frequently. or draw. his best move is that winning move.e. lose. maximin is distinct from minimax. Minimax is used in zero-sum games to denote minimizing the opponent's maximum payoff. it's easy to see what the "best" move is. then player B's best move is the one leading to a draw. this is not generally the same as minimizing the opponent's maximum gain. In non-zero-sum games. draw. this is identical to minimizing one's own maximum loss. Late in the game. and to maximizing one's own minimum gain. in game theory. while on the next turn player B is trying to minimize the chances of A winning (i. The Minimax algorithm helps find the best move. to maximize B's own chances of winning) . stated below. there is a minimax algorithm for game solutions. deals with games such as tic-tac-toe. at best. or to the Nash equilibrium strategy Combinatorial game theory In combinatorial game theory. by working backwards from the end of the game. If player B knows that one move will lead to the situation where player A can win in one move. If player A can win in one move. while another move will lead to the situation where player A can. At each step it assumes that player A is trying to maximize the chances of A winning. "Maximin" is a term commonly used for non-zero-sum games to describe the strategy which maximizes one's own minimum payoff. A simple version of the minimax algorithm. where each player can win.

i. and aimed at finding tools. or the complexity of the organization that has to make them. The most systematic and comprehensive software tools developed in this way are called decision support systems. methodologies and software to help people make better decisions. rationality and so forth in various ways. optimal decision often creates hypotheses for testing against actual behavior. but the difficulty of determining the optimal behaviour in the first . there is also a related area of study. The practical application of this prescriptive approach (how people should make decisions) is called decision analysis. attempting to describe what people will actually do.Decision theory Decision theory in mathematics and statistics is concerned with identifying the values. which is a positive or descriptive discipline. Furthermore it is possible to relax the assumptions of perfect information. Complex decisions Other areas of decision theory are concerned with decisions that are difficult simply because of their complexity.e. able to compute with perfect accuracy. and fully rational. assuming an ideal decision maker who is fully informed. the two fields are closely linked. Since the normative. Since it is obvious that people do not typically behave in optimal ways. In such cases the issue is not the deviation between real and optimal behaviour. uncertainties and other issues relevant in a given decision and the resulting optimal decision. it is concerned with identifying the best decision to take. allowing for further tests of the kind of decisionmaking that occurs in practice. Normative and descriptive decision theory Most of decision theory is normative or prescriptive. and produce a series of different prescriptions or predictions about behavior.

Lepper have published studies on this phenomenon. A number of researchers including Sheena S. or perhaps from rational ignorance. A popularization of this analysis was done by Barry Schwartz in his 2004 book. guilt reported True Positive 'guilty' unfairly) Type I error Decision False Negative Verdict of (i. One example shows a structure for deciding guilt in a criminal trial: Actual condition Guilty Not guilty False Positive Verdict of (i. The risks of Type I and type II errors can be quantified (estimated probability. It is sometimes theorized to be caused by analysis paralysis. etc) and rational decision making is improved. evaluate risks. cost. Iyengar and Mark R. Paradox of choice Observed in many cases is the paradox that more choices may lead to a poorer decision or a failure to make a decision at all.place. and aid in decision making. developed a model of economic growth and resource usage that helps politicians make real-life decisions in complex situations. real or perceived. The Club of Rome. expected value. Statistical decision theory Several statistical tools and methods are available to organize evidence. The Paradox of Choice.e.e. for example. guilt True Negative 'not guilty' not detected) Type II error .