Take the 2-minute tour ×
Quantitative Finance Stack Exchange is a question and answer site for finance professionals and academics. It's 100% free, no registration required.

This is an abstracted version of the problem I'm facing and I have to tell you first, my question might not be precise and or even correct, so I hope you understand and in that case can improve the point. I'm striking a problem field that I'm not very familiar with. But case is this.

There is an organization that has lets say 7 departments. Departments are getting a share of the money, say 1000000. There are several variables that affects the final share of the sum 1M per department. Variables are divided to sections and meters:

Section (S) 1, 2, 3 and 4 which all has meters (m), lets say:

S1: m1, m2
S2: m1, m2, m3
S3: m1, m2
S4: m1, m2, m3, m4

Total score is calculated by summing up all meters on all sections. And total score is used to calculate portion of the share. There is some other math involved at this point, but I'm simplifying the problem now for this question.

Departments also have some variables, like size by employers, their salary, activities performed and such, which defines initial sum they get. But total of all departments is 1M.

Now after certain time period, say 4 months, variables are checked and new portion of the share is calculated based on sections and their and meters.

This raises a problem, which might not be apparent on simple example given above, but what is the actual question and problem of mine. Departments will get certain percentage of the share, so bigger departments will get bigger and smaller will get smaller. It looks like this is not rightful and equal in this system, because more the bigger departments get, slice from the share is bigger and it affects increasingly on smaller departments. At the moment share is somewhat percentage (linear) based, but I was thinking if share could be functionally (logarithm) defined, or something else. Does anyone has insight to this kind of problem?

share|improve this question
    
do I understand you correctly that you are basically facing an optimization problem ? You would like to distribute a fixed amount of money amongt serveral departments and under certain restriction. (e.g. department one should get at least $c_1$ amount but not more than department two etc. Thus this restrictions could become arbitrarily complex) - correct ? –  Probilitator Feb 22 at 9:52
    
Yes @Probilitator it's optimization problem, but there is no minimum sum every department should get, to a the moment. Maybe there should be... But I'm after an algorithm which prevents smaller departments losing too much of the total share when bigger departments gets their increased percentual share. –  PHPGAE Feb 23 at 9:22
    
do you know how genetic algorithms work - this is precisly the type of task they excell at. You would first however need to set the restrictions. Do you have trouble formulating those restrictions mathematically ? So are you looking for a mathematical formulation of the "smaller departments losing too much of the total share when bigger departments gets their increased percentual share" ? –  Probilitator Feb 23 at 10:21

Your Answer

 
discard

By posting your answer, you agree to the privacy policy and terms of service.

Browse other questions tagged or ask your own question.