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SIMULATION EXAMPLES

SIMULATION EXAMPLES. MONTECARLO (STATIC) SIMULATIONS. Examples. Monte-Carlo (Static) Simulation Estimating profit on a sale promotion Newsvendor problem Estimating p value Approximating integrals. Profit on a Sale Promotion. Furniture Store Unit cost: $175

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SIMULATION EXAMPLES

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  1. SIMULATION EXAMPLES MONTECARLO (STATIC) SIMULATIONS

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

  3. 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

  4. 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

  5. Estimating p value X, Y ~ uniform (0,1) Estimate p value by simulation 1 p/4 1 0

  6. Convergence to p

  7. Approximating Integrals Consider the integral Making the substitution we get where

  8. Approximating Integrals Let Y ~ uniform(0,1) Approximate the integral by simulation

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