Algorithm to find optimal currency denominations Mark lives in a tiny country populated by people who tend to over-think things. One day, the king of the country decides to redesign the country's currency to make giving change more efficient. The king wants to minimize the expected number of coins it takes to exactly pay any amount up to (but not including) the amount of the smallest paper bill.

Suppose that the smallest unit of currency is the Coin. The smallest paper bill in the kingdom is worth $n$ Coins. The king decides that there should not be more than $m$ different coin denominations in circulation. The problem, then, is to find a $m$-set $\{d_1, d_2, ..., d_m\}$ of integers from $\{1, 2, ..., n - 1\}$ which minimizes $\frac{1}{n-1}\sum_{i = 1}^{n-1}{c_1(i) + c_2(i) + ... + c_m(i)}$ subject to $c_1(i)d_1 + c_2(i)d_2 + ... c_m(i)d_m = i$.

For instance, take the standard USD and its coin denominations of $\{1, 5, 10, 25, 50\}$. Here, the smallest paper bill is worth 100 of the smallest coin. It takes 4 coins to make 46 cents using this currency; we have $c_1(46) = 1, c_2(46) = 0, c_3(46) = 2, c_4(46) = 1, c_5(46) = 0$. However, if we had coin denominations of $\{1, 15, 30\}$, it would take only 3 coins: $c_1(46) = 1, c_2(46) = 1, c_3(46) = 1$. Which of these denomination sets minimizes the average number of coins to make any sum up to and including 99 cents?

More generally, given $n$ and $m$, how might one algorithmically determine the optimal set? Clearly, one might enumerate all viable $m$-subsets and compute the average number of coins it takes to make sums from 1 to $n - 1$, keeping track of the optimal one along the way. Since there are around $C(n - 1, m)$ $m$-subsets (not all of which are viable, but still), this would not be terribly efficient. Can you do better than that?
This is related to the well-known change-making problem. So well-studied, in fact, that this question has been investigated for $m \leq 7$ [1] using brute force. As of 2003, the hardness of finding optimal denominations appears to be an open problem.

If you check the articles citing Shallit, it seems as if denominations enabling greedy change-making strategies were of particular interest. It is clear that such denominations have advantages in practice.




What This Country Needs is an 18c Piece
 by Jeffrey Shallit (2003)