Scribd
Upload
5 views13 pages

Ch-8 Simulation 2

The document introduces simulation as a management science technique used to model complex systems under uncertainty and risk. It highlights the advantages of simulation, such as gaining insights and conducting 'what if' analyses, while also noting its disadvantages, including time consumption and lack of guaranteed optimal solutions. Monte Carlo simulation is emphasized as a method for predicting system behavior by modeling stochastic processes and utilizing random number generators.

Uploaded by

mistere
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
5 views13 pages

Ch-8 Simulation 2

The document introduces simulation as a management science technique used to model complex systems under uncertainty and risk. It highlights the advantages of simulation, such as gaining insights and conducting 'what if' analyses, while also noting its disadvantages, including time consumption and lack of guaranteed optimal solutions. Monte Carlo simulation is emphasized as a method for predicting system behavior by modeling stochastic processes and utilizing random number generators.

Uploaded by

mistere
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
You are on page 1/ 13

Introduction to

Simulation

Dr Shimels Zewdie 1
1
Uncertainty and Risk in Decision Making

 Mangers face decisions every day


 Most decisions involve uncertainty
 Risk may also be present
 Quantitative models can provide a tremendous
insight and assistance in decision making
 Quantitative models may ignore uncertainty in
real situations

Dr Shimels Zewdie 2
2
Simulation Overview
 A model that mimics what might happen in reality.
 Examples
 Weather forecasting
 Rocket simulators
 Military war-game simulations
 Business Examples
 Capital projects
 Business process redesign
 Production process analysis
 Service system analysis

Dr Shimels Zewdie 3
3
Simulation
 Simulation is one of the most frequently
employed management science
techniques.
 It is typically used to model random
processes that are too complex to be
solved by analytical methods.

Dr Shimels Zewdie 4
Simulation Overview (continued)

 Much of the time, uncertainty is present in the


system we wish to study.
 Simulation provides a way to directly model the
uncertainty and/or dynamic behavior of the
system.
 Monte-Carlo simulation is the focus of this
chapter.
 It focuses on assessing the uncertainty and
risk of a particular situation or decision.
 Monte-Carlo simulation that repeatedly samples
from probability distributions and computes the5
Dr Shimels Zewdie 5
Advantages of Simulation
 Among the advantages of simulation is the
ability to gain insights into the model
solution which may be impossible to attain
through other techniques.
 Also, once the simulation has been
developed, it provides a convenient
experimental laboratory to perform "what
if" and sensitivity analysis.

Dr Shimels Zewdie 6
Disadvantages of Simulation
 A large amount of time may be required to
develop the simulation.
 There is no guarantee that the solution
obtained will actually be optimal.
 Simulation is, in effect, a trial and error
method of comparing different policy
inputs.
 It does not determine if some input which
was not considered could have provided a
Dr Shimels Zewdie 7

better solution for the model.


Monte-Carlo Simulation
 Monte Carlo method can be described as a
numerical technique that involves modeling a
stochastic system with the objective of
predicting the system’s behavior.
 In using this method, a given problem is solved
by simulating the original data with random
number generator.
 Its use requires two things:

Dr Shimels Zewdie 8
1. The model that represent an image of reality. Here
model refers to the probability distribution of the
variable in question. It may be obtained by direct
observation or past records.

2. A mechanism to simulate the model. It is something to


capture the random nature of the given system.

• Random variable values are utilized in the model

• We should have available procedure that would help


us to select, at random, the values of the variables

Dr Shimels Zewdie 9
Random number generators
 Manual methods, For ex spinning arrow (by
dividing the face of clock in to 100 parts), two
dices, cards, etc

 Using calculators

 Using computers

 Published tables
 Midsquare

Dr Shimels Zewdie 10
Random Variables

 Each random variable is mapped to a set of


numbers so that each time one number in that
set is generated, the corresponding value of the
random variable is given as an input to the
model.
 The mapping is done in such a way that the
likelihood that a particular number is chosen is
the same as the probability that the
corresponding value of the random variable
occurs. Dr Shimels Zewdie 11
Process of Simulation
1. Definition of the problem and statement of
objective

2. Constriction of an appropriate model.

3. Experimentation with the model constructed

4. Evaluation of the result

Dr Shimels Zewdie 12
Simulation Modeling Process
 Determine the appropriate probability distributions
and parameters to use for the random inputs.
 Probability Distributions are used to model the
random inputs.
 A very important part of simulation is modeling
the random behavior of a situation using
probability distributions.
 As noted before, since some of the inputs are
random, the output of a simulation is also
random.
 However, the probability distribution of the
output of a simulation does not necessarily look
like one of the standard probability
Dr Shimels Zewdie 13
13

You might also like