SIMULATION EXAMPLES

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SIMULATION EXAMPLES

• MONTECARLO (STATIC) SIMULATIONS

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Examples

• Monte-Carlo (Static) Simulation
• Estimating profit on a sale promotion
• Newsvendor problem
• Estimating p value
• Approximating integrals

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Profit on a Sale Promotion

• Furniture Store
• Unit cost 175
• Demand distribution TRIA(500, 2000, 3500)
• Unit price distribution UNIF(200, 300)
• 50 off sale
• Determine the order amount for maximizing profit.
• Estimating profit on a sale promotion

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Newsvendor Problem

• Wholesale price 0.55
• Retail price 1.00
• Scrap price 0.03
• Demand distribution NORM(135.7, 27.1)
• Determine the order amount for maximizing profit
• Newsvendor Problem

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Estimating p value
X, Y uniform (0,1) Estimate p value by
simulation
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p/4
1
0
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Convergence to p
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Approximating Integrals
Consider the integral Making the
substitution we get where
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Approximating Integrals
Let Y uniform(0,1) Approximate the
integral by simulation