Linear Programming

Sensitivity Analysis

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 Sensitivity Analysis

• To explore the effects of potential changes in the

parameters of LP models on the optimal solution

• Sensitivity analysis allows us to determine how “sensitive”

the optimal solution is to changes in data values.

• This includes analyzing changes in:

– An Objective Function Coefficient (OFC)
– A Right-Hand Side (RHS) value of a constraint
– A change in a coefficient of a constraint

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OPTIMAL SOLUTION comprises two
parts  Optimal values of decision
variables and Optimal value of objective Optimal values of
decision variables
function

Optimal value of
objective function
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 Graphical Sensitivity Analysis

• We can use the graph of an LP to see what

happens when:

– An OFC changes, or
– A RHS of a constraint changes

• Recall the Carpenter’s problem

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 Carpenter’s Problem

Objective function:

Maximize 10 X1 + 7 X2 (profit)

Subject to:

15 X1 + 10 X2 <= 140 (wood constraint)

4 X1 + 5 X2 <= 56 (labour hours constraint)

X1 & X2 >= 0 (non-negativity constraints)

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 Objective Function Coefficient (OFC) Changes

• What if the profit contribution for chair changed from

Rs. 7 to Rs. 9 per chair?

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Max 10 X1 + 7 X2 (profit)

• Clearly profit goes up, but would we want to make

more chairs and less tables?
(i.e. Does the optimal solution change?)

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 Profit contribution changed from Rs. 7 to Rs. 9 per chair

Original
Objective Function
10 X1 + 7 X2 = 96

Revised
Objective Function
10 X1 + 9 X2 = 112

Effect of profit contribution

changed from Rs. 7 to Rs. 9
per chair:

X1=4 and X2=8 are still

optimal point (Optimal values
of decision variables do not
change)

Optimal value of objective

function is changed from 96
to 112)
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 Profit contribution changed from Rs. 7 to Rs. 15 per chair

Original
Objective Function
10 X1 + 7 X2 = 96

Revised
Objective Function
10 X1 + 15 X2 = 168

Effect of profit contribution

changed from Rs. 7 to Rs. 15
per chair:

New optimal corner point

X1=0 and X2=11.2 (Optimal
values of decision variables
are changing)

Optimal value of objective

function is changed from 96
to 168)
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 Objective Function Coefficient (OFC) Changes

• There is no effect on the feasible region

• Optimal value of objective function will change
• The slope of the profit line changes
• If the slope changes enough, a different corner point will
become optimal

• There is a range for each OFC where the current optimal corner
point remains optimal.
• If the OFC changes beyond that range a new corner point
becomes optimal.

• Excel’s Solver will calculate the OFC range.

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 Range of optimality
Range of optimality is about…
Finding the range of objective function values (OFC) for which
the optimal values of the decision variables will not change, Range of optimality:
although the optimal value of the objective function will The optimal value of
decision variables will
change. not change as long as
the OFC is between
12.5 to 6.66

1) Reduced Cost: The

amount by which OFC
should improve in
order to bring that
decision variable to
optimal solution and
retaining the optimal
value of objective
function.
2) The reduced cost of
a variable may be
interpreted as the
amount of penalty you
would have to pay to
introduce one unit of
that variable into the
Reduced Cost is also called as Opportunity Cost solution. 10
 Right Hand Side (RHS) value of a constraint changes
Applicable only for Binding Constraints

• What if wood availability changed from 140 to 190?

190
15 X1 + 10 X2 <= 140 (wood constraint)

• This increase in resources could allow us to increase

production and profit?

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 Right Hand Side (RHS) value of a constraint changes
Applicable only for Binding Constraints

Decrease
in feasible
region
area Increase in feasible
region area
Feasible Region changes 12
 Right Hand Side (RHS) value of a constraint changes

• The constraint line shifts, which could change the

feasible region

• Slope of constraint line does not change

• Corner point locations can change

• The optimal solution can change (both optimal value

of decision variables and optimal value of objective
function will change)
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 Right Hand Side (RHS) value of a constraint changes

• New profit = 127.43

• Old profit = 96.00
• Profit increase = 31.43 (from 50 additional cu.ft. of wood)

0.6286 in profit increase (hundreds of rupees) per cu.ft. of additional

wood availability

• Each additional cu.ft. of wood will increase profit by Rs. 62.86

• Each cu.ft. of wood lose, will decrease profit by Rs. 62.86

The change in the objective function value per one-unit

increase in the RHS of the constraint is called Shadow Price
(also called as Dual Price).

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 Solver’s Sensitivity Report

• When Excel Solver is used to find an optimal solution, the option of

generating the “Sensitivity Report” is available.

Range of feasibility
210 to 112

The change in the objective function value per

one-unit increase in the RHS of the constraint
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is called Shadow Price.
 Range of Feasibility
• Range of feasibility
– The range of values over which the right-hand-side (RHS) value can
change without causing the shadow price to change.
– Within this range of feasibility, the same decision variables will remain
optimal, although their values and the optimal value of the objective
function will change.
– Analysis of RHS changes begins with determination of a constraint’s
shadow price in the optimal solution.
– The change in objective function value = (shadow price) x (RHS
change)

• Excel will calculate this range as well as the shadow price.

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 Benefits of sensitivity analysis

• Enables the decision maker to determine how a change in

one of the values of a model will impact the optimal solution
and the optimal value of the objective function while holding
all other parameters constant.

• Provides the decision maker with greater insight about the

sensitivity of the optimal solution to changes in various
parameters of a problem.

• Permits quick examination of changes due to improved

information relating to a problem

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Answer Report

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Sensitivity Analysis Report

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 Simultaneous Changes
All changes discussed up to this point have involved only 1 change at a time.

What if several OFC’s change?

Or
What if several RHS’s change?

Note: they cannot be mixed

The 100% Rule

∑ (change / allowable change) < 1

The sensitivity report can still be used

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 The 100% Rule

What if more than one coefficient is changed?:

100% Rule (for objective function coefficients):

c j
if  c
j
<= 1, the optimal value of decision variables will not change,
j

where c j is the actual increase (decrease) in the coefficient

and  c j is the maximum allowable increase (decrease) from

the sensitivity analysis.

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 The 100% Rule

Simultaneous variations in multiple coefficients:

100% Rule (for RHS constants):

b j <= 1, the optimal basis and product mix will not change,
if j b j

where b j is the actual increase (decrease) in the coefficient

and  b j is the maximum allowable increase (decrease) from

the sensitivity analysis.

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 Limits Report

Limits reports tell you how the value of the objective function changes
as each variable is maximized and minimized, while all other values
are held constant and while still satisfying the problem's constraints.

The Objective Result values show you the value of the objective function
corresponding to the lower and upper limits of the variables obtained
through a maximization and minimization process as described.

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