4. Sensitivity Analysis in Linear Programs

  1. Kenneth R. Baker

Published Online: 7 MAR 2011

DOI: 10.1002/9780470949108.ch4

Optimization Modeling with Spreadsheets, Second Edition

Optimization Modeling with Spreadsheets, Second Edition

How to Cite

Baker, K. R. (2011) Sensitivity Analysis in Linear Programs, in Optimization Modeling with Spreadsheets, Second Edition, John Wiley & Sons, Inc., Hoboken, NJ, USA. doi: 10.1002/9780470949108.ch4

Author Information

  1. Tuck School of Business, Dartmouth College, Hanover, NH, USA

Publication History

  1. Published Online: 7 MAR 2011
  2. Published Print: 4 APR 2011

ISBN Information

Print ISBN: 9780470928639

Online ISBN: 9780470949108

SEARCH

Keywords:

  • binding constraint;
  • decision variable;
  • linear programming;
  • parameter analysis;
  • sensitivity analysis;
  • shadow prices

Summary

This chapter covers three approaches to sensitivity analysis: the parameter analysis report, the sensitivity report, and the interpretation of optimal patterns. The sensitivity report is the most canned approach. It is a well defined report that complements the use of Solver. Most importantly, it automatically reveals shadow prices and allowable ranges. The parameter analysis report allows the user quite a lot of flexibility, and provides for linear programs the same kind of capability that Excel’s Data Table tool provides for basic spreadsheet models. The recognition of patterns in linear programming solutions is a way of looking beyond the specific numbers in the result and toward a broader economic imperative. By focusing on positive decision variables and binding constraints, this interpretation emphasizes the key factors in the model that drive the form of the solution. The chapter ends with illustrative examples and followed by a set of practice exercises.

Controlled Vocabulary Terms

linear programming; sensitivity analysis; shadow price