Budgeting with bounded multiple-choice constraints

We consider a budgeting problem where a speciied number of projects from some disjoint classes has to be selected such that the overall gain is largest possible, and such that the costs of the chosen projects do not exceed a xed upper limit. The problem has several application in government budgeting, planning, and as relaxation from other combinatorial problems. It is demonstrated that the problem can be transformed to an equivalent Multiple-choice Knapsack Problem through dynamic programming. A naive transformation however leads to a drastic increase in the number of variables, thus we propose an algorithm for the continuous problem based on Dantzig-Wolfe decomposition: A master problem solves a Continuous Multiple-choice Knapsack Problem knowing only some extreme points in each of the transformed classes. The individual subproblems nd extreme points for each given direction, using a median search algorithm. An integer optimal solution is then derived by using the dynamic programming transformation to a Multiple-choice Knapsack Problem for an expanding core. The individual classes are considered in an order given by their gradients, and the transformation to a Multiple-choice Knapsack Problem is performed when needed. In this way, only a dozen of classes need to be transformed for standard instances from the literature. Computational experiments are presented, showing that the developed algorithm is orders of magnitude faster than a general LP/MIP algorithm.