Simulation, Applied Statistics

Simulation

When decisions are to be taken under conditions of uncertainty, simulation can be used. Simulation as a quantitative method requires the setting up of a mathematical model which would represent the interrelationships between the variables involved in the actual situation in which a decision is to be taken. Then, a number of trials or experiments are conducted with the model to determine the results that can be expected when the variables assume various values. Simulation can therefore be defined as a procedure whereby one can draw conclusions about the behavior of a given system by examining the behavior of a corresponding model whose cause-effect relationships are similar to those in the actual system. There are a few basic concepts which must be understood before applying the simulating technique.

  1. System: It is that segment to be studied or understood to draw conclusions. In the illustration given above, the market for the product together with the firms' production process constitute the relevant system. Only after the system is defined, can we identify the variables which interact with one another in the system and establish their relationships mathematically.

  2. Decision Variables: A variable, as its name implies, may assume differing values under differing sets of circumstances. Decision variables are those variables whose value is to be determined through the process of simulation. In our illustration, the price to be charged by the firm for its product is the decision variable.

  3. Environmental Variables: These are the variables which describe the environment and are dependent upon that environment in which the system is operating. In the illustration, competitors' average price, consumer preferences and demand, etc. are the environmental variables.

  4. Endogenous Variables: Unlike the environmental variables these are generated within the system itself. In the illustration, quantity sold, sales revenue, total cost and profit are endogenous variables.

  5. Criterion Function: One or more of the endogenous variables or some specified combination of these is used as the criterion function for evaluating the performance of the system. In the illustration, profit is used as the criterion function.

 

Posted Date: 9/15/2012 5:33:55 AM | Location : United States







Related Discussions:- Simulation, Assignment Help, Ask Question on Simulation, Get Answer, Expert's Help, Simulation Discussions

Write discussion on Simulation
Your posts are moderated
Related Questions
Bernoulli's Theorem If a trial of an experiment can result in success  with probability p and failure with probability q (i.e.1-p) the probability of exactly r success in n tri

Grouped Data For calculating mode from a frequency distribution, the following formula   Mode = L mo +  x W where,

Deviation Measures The drawback of the range as a measure of dispersion is that it takes into account the values of only two data points - the largest and the smallest. One

Find unlabeled data set test.txt and initial centroids data set centroids.txt in the archive, both files have the following format: [attribute1_value attribute2_value ...

Variance The term variance was used to describe the square of the standard deviation by R.A.Fisher. The concept of variance is highly important in areas where it is possible to

Systematic Random Sampling This method  is generally used in such cases where a complete list of the population is available from which sample has to be selected. Under this

Features of index numbers

fixed capacitor and variable capacitor

Education seems to be a very difficult field in which to use quality methods. One possible outcome measures for colleges is the graduation rate (the percentage of the students matr

A study was conducted to determine the amount of heat loss for a certain brand of thermal pane window. Three different windows were randomly subjected to each of three different ou