Prices

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