The Accuracy of Aggregate LP Production Planning Models

This paper provides valuable evidence concerning the use of small, simple models to represent complex systems. The focus is on linear programming planning models. The starting point is a large, detailed model which serves as a proxy for reality. From the large model, we derive a smaller one through aggregation. Through a process of calibration, we develop estimation models for determining the value of the detailed model objective function value from the aggregate model objective function value and a few additional explanatory variables. This overall procedure proves to be remarkably accurate.