Simulation to Infer Future Performance Levels Given Assumptions

Cynthia Fraser
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Cynthia Fraser: University of Virginia, McIntire School of Commerce

Chapter Chapter 4 in Business Statistics for Competitive Advantage with Excel 2013, 2013, pp 85-112 from Springer

Abstract: Abstract Decision makers deal with uncertainty when considering future scenarios. Performance levels depend on multiple influences with uncertain future values. To estimate future performance, managers make assumptions about likely future scenarios and uncertain future values of performance components. To evaluate decision alternatives, the “best” and “worst” case outcomes are sometimes compared. Alternatively, Monte Carlo simulation can be used to simulate random samples using decision makers’ assumptions about performance components, and those random samples can then be combined to produce a distribution of likely future scenarios and outcomes that are less extreme that the “best” and “worst” cases. Inferences from a simulated distribution of outcomes can then be made to inform decision making. “Best” and “worst” case comparisons are contrasted with inferences from Monte Carlo simulation in this chapter.

Keywords: Uncertain Future Value; Evaluate Decision Alternatives; Decision Makers Deal; Organic Food Sales; Bottles Sold (search for similar items in EconPapers)
Date: 2013
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Persistent link: https://EconPapers.repec.org/RePEc:spr:sprchp:978-1-4614-7381-7_4

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DOI: 10.1007/978-1-4614-7381-7_4

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