Solution of the Lorie-Savage and Similar Integer Programming Problems by the Generalized Lagrange Multiplier Method

A specific type of all-integer integer programming problem which seems to arise frequently in capital budgeting and other areas involves a zero-one restriction on the problem variables. Approaches to solutions to such problems by the General Lagrange Multiplier Method are discussed. This procedure, because of its relative simplicity, has certain advantages over other direct methods such as the use of integer programming algorithms, especially in areas such as capital budgeting where the constraints are usually not binding to the degree indicated by the problem statement. Throughout this paper, the Lorie-Savage problem in capital budgeting is used as a basis for the discussion.