Spreadsheet Modeling amp; Decision Analysis.ppt

2-* Proportionality and Additivity Assumptions An LP objective function is linear; this results in the following 2 implications: proportionality: contribution to the objective function from each decision variable is proportional to the value of the decision variable. e.g., contribution to profit from making 4 aqua-spas (4?$350) is 4 times the contribution from making 1 aqua-spa ($350) 2-* Proportionality and Additivity Assumptions (cont.) Additivity: contribution to objective function from any decision variable is independent of the values of the other decision variables. E.g., no matter what the value of x2, the manufacture of x1 aqua-spas will always contribute 350 x1 dollars to the objective function. 2-* Proportionality and Additivity Assumptions (cont.) Analogously, since each constraint is a linear inequality or linear equation, the following implications result: proportionality: contribution of each decision variable to the left-hand side of each constraint is proportional to the value of the variable. E.g., it takes 3 times as many labor hours (9?3=27 hours) to make 3 aqua-spas as it takes to make 1 aqua-spa (9?1=9 hours) [No economy of scale] 2-* Proportionality and Additivity Assumptions (cont.) Additivity: the contribution of a decision variable to the left-hand side of a constraint is independent of the values of the other decision variables. E.g., no matter what the value of x1 (no. of aqua-spas produced), the production of x2 hydro-luxes uses x2 pumps, 6x2 hours of labor, 16x2 feet of tubing. 2-* More Assumptions Divisibility Assumption: each decision variable is allowed to assume fractional values Certainty Assumption: each parameter (objective function coefficient cj, right-hand side constant bi of each constraint, and technology coefficient aij) is known with certainty. End of Chapter 2 * Spreadsheet Modeling  Decision Analysis A Practical Introduction to Management Science 5th edition Cliff T. Ragsdale Introduction to Optimization a