Question

In an optimization model, what do you do if data or parameter isn't known exactly or if forecast values aren't known exactly?

Answer 1

In an optimization model, strategies such as sensitivity analysis, risk analysis, and scenario analysis can be used to address uncertainty in data or parameters.

Step-by-step explanation:

In an optimization model, if data or parameters are not known exactly or if forecast values are not known exactly, there are several strategies that can be used to address this uncertainty:

• Sensitivity analysis: Examining how changes in the values of uncertain parameters affect the output of the model.
• Risk analysis: Assessing the likelihood and impact of different possible outcomes based on the uncertainty in the data or parameters.
• Scenario analysis: Evaluating the model's performance under different hypothetical scenarios or assumptions.

These strategies can help decision-makers make informed choices even when exact information is not available.