A practical approach to sensitivity analysis in linear programming under degeneracy for management decision making

Abstract

Linear programming (LP) is a widely used tool in management decision making. Theoretically, sensitivity analysis of LP problems provides useful information for the decision maker. In practice, however, most LP software provides misleading sensitivity information if the optimal solution is degenerate. The paper shows how sensitivity analysis of LP problems can be done correctly when the optimal solution is degenerate. A production planning example is presented to illustrate the incorrect sensitivity analysis results automatically provided by most LP solvers. The general characteristics of the misleading results and the possible effects of this incorrect information on management decisions are also discussed.