Encyclopedia of Operations Research and Management Science

2001 Edition
| Editors: Saul I. Gass, Carl M. Harris


Reference work entry
DOI: https://doi.org/10.1007/1-4020-0611-X_789

In the simplex method, for a nonbasic variable xj, the price is defined as dj = cjzj or dj = zjcj, where cj is the variable's original cost coefficient and zj = πAj, with Aj the variable's original column of coefficients and π the multiplier (pricing) vector of the current basis. The dj is termed the reduced or relative cost. It is the difference between the direct cost cj and indirect cost zj. The dj indicates how much the objective function would change per unit change in the value of xj. The dj for the variables in the basic feasible solution are equal to zero. Devex pricing; Opportunity cost; Simplex method.

Copyright information

© Kluwer Academic Publishers 2001

Authors and Affiliations

  1. 1.Robert H. Smith School of BusinessUniversity of MarylandCollege PartUSA
  2. 2.School of Information Technology & EngineeringGeorge Mason UniversityFairfaxUSA