Chapter 10
NONLINEAR
PROGRAMMING
Learning
Objectives
Understand the difference between
linear programming and nonlinear
programming
Understand and solve Nonlinear
Programming Problems
Formulate Nonlinear
Programming Problems and
solve using Excel
What is Nonlinear?
Nonlinear Programming has the same format as a linear
programming model but the objective function or
constraints, or both, are nonlinear functions
Nonlinear Programming problems
are given a separate name because
they are solved in a different manner When problems fit the general linear
than linear programming problems programming format but include
nonlinear functions, they are referred to
as nonlinear programming problems.
In linear programming problems, solutions are
found at the intersections of lines or planes, and
though there may be a very large number of
possible solution points, the number is finite, and a
solution can eventually be found
However, in nonlinear programming, there may be
no intersection or corner points, instead, the solution
space can be an undulating line or surface, which
includes virtually an infinite number of points
Nonlinear
Programming
125
In a realistic problem, the solution
100
space may be like a mountain range,
with many peaks and valleys, and the 75
maximum or minimum solution could
50
be at the top of any peak or at the
25
bottom of any valley.
0
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What is difficult in nonlinear programming 125
is determining if the point at the top of a 100
peak is just the highest point in the
75
immediate area (called a local optimal, in
50
calculus terms) or the highest point of all
25
(called the global optimal).
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The Problem
The problem encountered by these 125
methods is that they sometimes have 100
trouble determining whether the high 75
point they have identified is just a local 50
optimal solution or the global optimal 25
solution 0
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Nonlinear Profit
Analysis
Profit Function with no
constraints
Profit Function with objective
function and 1 constraint
Objective function with Multiple
Constraints
NONLINEAR PROFIT
ANALYSIS
To demonstrate the solution procedure, we will use a
profit function based on break-even analysis
Recall that in break-even analysis the profit function,
Z, is formulated as
Z = vp - Cf - vCv
where
v = sales volume (i.e., demand)
p = Price
Cf = Fixed Cost
Cv = Variable Cost
40 One important but somewhat
unrealistic assumption of this
30
break-even model is that the
20
volume, or demand, is independent
of the price (i.e., volume remains
10
constant, regardless of the price of
the product).
0
Item 1 Item 2 Item 3 Item 4
For our Western Clothing Company example from
Chapter 1, let us suppose that the dependency of
demand on price is defined by the following linear
function:
v = 1,500 - 24.6p
The figure illustrated the fact that as price increases, demand
decreases, up to a particular price level ($60.98) that will result in
no sales volume.
Nonlinear
Profit
Analysis
The linear relationship, v=1,500 - 24.6p, is
illustrated in Figure 10.1
Now we will insert our new relationship for volume (v) into our
original profit equation
Z = vp - Cf - vCv
Z = (1,500 - 24.6p)p - Cf - (1,500 - 24.6p)Cv
= 1,500p - 24.6p²- Cf - 1,500Cv - 24.6pcv
Substituting values for fixed cost (Cf = $10,000) and variable
cost (Cv = $8) into this new profit function results in the
following equation:
Z = 1,500p - 24.6p² - 10,000 - 1,500(8) + 24.6p(8)
Z = 1,696.8p - 24.6p² - 22,000
Because of the squared term, this equation for profit is now a nonlinear,
or quadratic, function that relates profit to price, as shown in Figure 10.2
The greatest profit will occur at the point where the profit curve is at its highest.
At the point the slope of the curve will equal to zero, as
shown in Figure 10.3.
Derivative
The slope of the curve for the
given function is called the
derivative of a function.
In calculus, the slope of a curve at any point is equal to
the derivative of the mathematical function that defines
the curve. The derivative of our profit function is
determined as follows:
Z = 1,696.8p - 24.6p² - 22,000
Given this derivative, the slope of the profit
curve at its highest point is defined by the
following relationship:
0 = 1,696.8 - 49.2p
Now we can solve this relationship for the
optimal price, p, which will maximize total
profit:
0 = 1,696.8 - 49.2p
49.2p = 1,696.8
p = 1,696.8 / 49.2
p= $34.49
The optimal volume of denim jeans to produce is
computed by substituting this price into our
previously developed linear relationship for volume:
v = 1,500 - 24.6p
= 1,500 - 24.6 (34.49)
= 651.6 pair of jeans
The maximum total profit is computed as follows:
Z = 1,696.8p - 24.6p² - 22,000
= 1,696.8 (34.49) - 24.6 (34.49)² - 22,000
= $ 7,259.45
The maximum profit, optimal price, and optimal
volume are shown graphically in Figure 10.4
AN IMPORTANT THIS IS EXACTLY WHAT
CONCEPT WE HAVE YET WE DID IN LINEAR
TO MENTION IS THAT PROGRAMMING WHEN
BY EXTENDING THE WE DETERMINED THE
BREAK-EVEN MODEL IN OTHER WORDS, WE VALUES OF DECISION
THIS WAY, WE HAVE ARE NOW ABLE TO VARIABLES THAT
CONVERTED IT INTO AN MAXIMIZE AN OPTIMIZED AN
OPTIMIZATION MODEL. OBJECTIVE FUNCTION OBJECTIVE FUNCTION.
(PROFIT) BY
DETERMINING THE
OPTIMAL VALUE OF A
VARIABLE (PRICE).
The use of calculus to find optimal
values for variables is often referred to
as classical optimization.
CONSTRAINED
OPTIMIZATION
In the preceding section, the profit analysis model was
developed as an extension of the breakeven model. Recall
that the total profit function was
Z = vp - Cf - vCv
where
v = volume
p = price
Cf = Fixed cost
Cv = Variable cost
and the demand function (i.e., volume as a function of price) was
v = 1,500 - 24.6p
By substituting this demand function into our total profit equation, we
developed a nonlinear function:
Z= 1,500p - 24.6p²- Cf - 1,500Cv - 24.6pcv
Then, by substituting values for ($10,000) and ($8) into this function, we
obtained We then differentiated this function, set it equal to zero, and
solved for the value of p ($34.49), which corresponded to the maximum
point on the profit curve (where the slope equaled zero).
Z = 1,696.8p - 24.6p² - 22,000
This type of model is referred to as an unconstrained
optimization model.
If we add one or more constraints to this model, it
becomes a constrained optimization model.
A constrained optimization model is more commonly
referred to as a nonlinear programming model.
Now we will transform this unconstrained optimization
model into a nonlinear programming model by adding
the constraint
p ≤ $20
In other words, because of market conditions, we are restricting
the price to a maximum of $20. This constraint results in a feasible
solution space, as shown in Figure 10.6.
The difficulty with nonlinear programming is that the
solution is not always on the boundary of the feasible
solution space formed by the constraint. For example,
consider the addition of the following constraint to our
original nonlinear objective function:
p ≤ $40
This constraint also creates a feasible solution space, as shown in Figure 10.7.
Point C represents a greater profit than point B, and it is also in the feasible solution space.
