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Understanding Sensitivity Analysis

This document discusses sensitivity analysis and its applications. It then provides an example of sensitivity analysis on a linear programming problem. 1) Sensitivity analysis determines how changes in input variables affect target variables in a model. It allows predicting outcomes given a range of variable values. 2) Sensitivity analysis is used in many fields including engineering, business, and the social sciences. 3) For the example linear programming problem, sensitivity analysis shows the range of unit profit for product X2 without changing the optimal production quantities of X1 and X2. Solving what-if scenarios through sensitivity analysis improves decision making beyond the initial optimal solution.

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Alvaro Abinesh
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71 views14 pages

Understanding Sensitivity Analysis

This document discusses sensitivity analysis and its applications. It then provides an example of sensitivity analysis on a linear programming problem. 1) Sensitivity analysis determines how changes in input variables affect target variables in a model. It allows predicting outcomes given a range of variable values. 2) Sensitivity analysis is used in many fields including engineering, business, and the social sciences. 3) For the example linear programming problem, sensitivity analysis shows the range of unit profit for product X2 without changing the optimal production quantities of X1 and X2. Solving what-if scenarios through sensitivity analysis improves decision making beyond the initial optimal solution.

Uploaded by

Alvaro Abinesh
Copyright
© All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd

AOR

Sensitivity Analysis

Prepared By:
Abinesh Kumar R
20MF01
Industrial Engineering

1
Definition
• Sensitivity analysis is a financial model that
determines how target variables are affected
based on changes in other variables known as
input variables.
• This model is also referred to as what-if or
simulation analysis.
• It is a way to predict the outcome of a decision
given in a certain range of variables.

2
Applications
• Environmental sciences
• Business
• Social sciences
• Chemistry
• Engineering
• Epidemiology
• Meta-analysis
• Multi-criteria decision making
• Time-critical decision making
• Model calibration
• Uncertainty Quantification

3
Why Sensitivity Analysis in LP?
• Post optimality analysis / Sensitivity Analysis is
used to determine how the optimal solution is
affected by changes within specified ranges:
The objective function coefficients
The right hand ride values (RHS)
• It is important to a manager who must
operate in a dynamic environment with
imprecise estimates of the coefficients.

4
What happens ?
If we change one coefficient at a time within allowable range.

Objective Function Right Hand Side

• The feasible region does not • Feasible region changes.


change. • If a nonbinding constraint is
• Since constraints are not changed, the solution is not
affected, decision variable affected.
values remain the same. • If a binding constraint is
• Objective function value will changed, the same corner
change. point remains optimal but
the variable values will
change.
5
Primal
Primal dual
dual relationship
relationship 10x1 + 8x2 Max
0.7x1 + x2 ≤ 630
Consider the LP problem shown. We will call this as a
“primal” problem. For every primal problem, there is (½) x1 + (5/6) x2 ≤ 600
always a corresponding LP problem called the “dual” x1 + (2/3) x2 ≤ 708
problem. (1/10) x1 + (1/4) x2 ≤ 135
630y1 + 600y2 + 708y3 + 135y4 - 150y5 Min -x1 - x2 ≤ -150
0.7y1 + (½)y2 y3 (1/10)y4 -y5 ≥ 10 x1 ≥ 0, x2 ≥ 0
y1 + (5/6)y2 + (2/3)y3 + (1/4)4 - y2 ≥ 8
y1 ≥ 0, y2 ≥ 0, y3 ≥ 0, y4 ≥ 0, y5 ≥ 0

•Any one of these can be called “primal”; the other one is “dual”.
•If one is of the size m x n, the other is of the size n x m.
•If we solve one, we implicitly solve the other.
•Optimal solutions for both have identical value for the objective function (if an
optimal solution exists).

6
Now consider the Solver solution. Maximize 10 x1 + 8 x2 = Z
 7/10 x1 + x2  630
 1/2 x1 + 5/6 x2  600
 x1 + 2/3 x2  708
1/10 x1 + 1/4 x2  135
x1 ≥ 0, x2 ≥ 0  x1 + x2 ≥ 150

Optimal solution: x1 = 540, x2= 252. Z = 7416


  

7
8
Answer
Answer The answer report has three tables:
1: Objective Cell – for the objective function
Report
Report 2: Variable Cells 3: for constraints.

ro fit
im al p
Opt

iable
Optimal var
values

9
Sensitivity Now we will consider changes in the
SensitivityAnalysis
Analysis objective function.
Objective function

Maximize 10 x1 + 8 x2 = Z
 7/10 x1 + x2  630
 1/2 x1 + 5/6 x2  600
Optimal solution:
 x1 + 2/3 x2  708 x1 = 540, x2= 252.
 1/10 x1 + 1/4 x2  135 Z = 7416

 x1 + x2 ≥ 150
x1 ≥ 0, x2 we
Here are some questions ≥ 0 will try to answer.
Q1: How much the unit profit of Ace can go up or down from $8 without changing the
current optimal production quantities?

10
Sensitivity
SensitivityAnalysis
Analysis Maximize 10 x1 + 8 x2 = Z
 7/10 x1 + x2  630
X1: 1/2
 Deluxe
x1 + 5/6 x2  600
X2: Ace  x1 + 2/3 x2  708
1/10 x1 + 1/4 x2  135
x1 ≥ 0, x2 ≥ 0  x1 + x2 ≥ 150

As long as the slope of the objective


function isoprofit line stays within the
 binding constraints.

  

11
Solver
Solver “Sensitivity
“Sensitivity Report”
Report” Z = 7416
Maximize 10 x1 + 8 x2 = Z x1 = 540, x2= 252

Q1: How much the unit profit of Ace can go up or down from $8 without
changing the current optimal production quantities?

Range for X1: 10 – 4.4 to 10 + 2


Range for X2: 8 – 1.333 to 8 + 6.286
Try per unit profit for X2 as 14.28, 14.29, 6.67 and 6.66

12
Conclusion
• Solving LP may be the first step in
decision making; sensitivity analysis
provides what if analysis to improve
decision making.

13
Thank You.

14

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