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The U.S. government is auctioning oil leases at two sites, A and B. At each site, 100,000 acres are to be auctioned. Three people are bidding as follows. Bidder one on site A is site A $1000/acre Bidder one on site B is $2000/acre Bidder two on site A is $900/acre Bidder two on site B is $2200/acre Bidder 3 on site A is $1100/acre and Bidder 3 on site B is $1900/acre The rules are that no bidder can receive more than 40% of the land being auctioned (i.e. the total amount of land being auctioned at both sites). (a) Draw a diagram of the problem as a network flow model. (b) Formulate a linear programming model to maximize the government’s revenue. (c) Solve the problem using optimization software.

Operation Management, Management Studies

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