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New Procedures to Select the Best Simulated System Using Common Random Numbers

Author

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  • Stephen E. Chick

    (Department of Industrial and Operations Engineering, The University of Michigan, 1205 Beal Avenue, Ann Arbor, Michigan 48109-2117)

  • Koichiro Inoue

    (Department of Industrial and Operations Engineering, The University of Michigan, 1205 Beal Avenue, Ann Arbor, Michigan 48109-2117)

Abstract

Although simulation is widely used to select the best of several alternative system designs, and common random numbers is an important tool for reducing the computation effort of simulation experiments, there are surprisingly few tools available to help a simulation practitioner select the best system when common random numbers are employed. This paper presents new two-stage procedures that use common random numbers to help identify the best simulated system. The procedures allow for screening and attempt to allocate additional replications to improve the value of information obtained during the second stage, rather than determining the number of replications required to provide a given probability of correct selection guarantee. The procedures allow decision makers to reduce either the expected opportunity cost associated with potentially selecting an inferior system, or the probability of incorrect selection. A small empirical study indicates that the new procedures outperform several procedures with respect to several criteria, and identifies potential areas for further improvement.

Suggested Citation

  • Stephen E. Chick & Koichiro Inoue, 2001. "New Procedures to Select the Best Simulated System Using Common Random Numbers," Management Science, INFORMS, vol. 47(8), pages 1133-1149, August.
    • Handle: RePEc:inm:ormnsc:v:47:y:2001:i:8:p:1133-1149
    DOI: 10.1287/mnsc.47.8.1133.10229
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    References listed on IDEAS

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    1. Barry L. Nelson & Frank J. Matejcik, 1995. "Using Common Random Numbers for Indifference-Zone Selection and Multiple Comparisons in Simulation," Management Science, INFORMS, vol. 41(12), pages 1935-1945, December.
    2. Kaufman, Gordon M, 1969. "Conditional Prediction and Unbiasedness in Structural Equations," Econometrica, Econometric Society, vol. 37(1), pages 44-49, January.
    3. Stephen E. Chick & Koichiro Inoue, 2001. "New Two-Stage and Sequential Procedures for Selecting the Best Simulated System," Operations Research, INFORMS, vol. 49(5), pages 732-743, October.
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    Cited by:

    1. Kleijnen, J.P.C. & Sanchez, S.M. & Lucas, T.W. & Cioppa, T.M., 2003. "A User's Guide to the Brave New World of Designing Simulation Experiments," Other publications TiSEM a6910d11-f9bc-4246-b1a7-2, Tilburg University, School of Economics and Management.
    2. L. Jeff Hong, 2006. "Fully sequential indifference‐zone selection procedures with variance‐dependent sampling," Naval Research Logistics (NRL), John Wiley & Sons, vol. 53(5), pages 464-476, August.
    3. Diana M. Negoescu & Peter I. Frazier & Warren B. Powell, 2011. "The Knowledge-Gradient Algorithm for Sequencing Experiments in Drug Discovery," INFORMS Journal on Computing, INFORMS, vol. 23(3), pages 346-363, August.
    4. Peter Frazier & Warren Powell & Savas Dayanik, 2009. "The Knowledge-Gradient Policy for Correlated Normal Beliefs," INFORMS Journal on Computing, INFORMS, vol. 21(4), pages 599-613, November.
    5. Nakayama, Marvin K., 2007. "Fixed-width multiple-comparison procedures using common random numbers for steady-state simulations," European Journal of Operational Research, Elsevier, vol. 182(3), pages 1330-1349, November.
    6. Shing Chih Tsai & Jun Luo & Chi Ching Sung, 2017. "Combined variance reduction techniques in fully sequential selection procedures," Naval Research Logistics (NRL), John Wiley & Sons, vol. 64(6), pages 502-527, September.
    7. Michael C. Fu & Jian-Qiang Hu & Chun-Hung Chen & Xiaoping Xiong, 2007. "Simulation Allocation for Determining the Best Design in the Presence of Correlated Sampling," INFORMS Journal on Computing, INFORMS, vol. 19(1), pages 101-111, February.
    8. Yijie Peng & Chun-Hung Chen & Michael C. Fu & Jian-Qiang Hu & Ilya O. Ryzhov, 2021. "Efficient Sampling Allocation Procedures for Optimal Quantile Selection," INFORMS Journal on Computing, INFORMS, vol. 33(1), pages 230-245, January.
    9. Ilya O. Ryzhov & Warren B. Powell, 2011. "Information Collection on a Graph," Operations Research, INFORMS, vol. 59(1), pages 188-201, February.
    10. Jack P. C. Kleijnen & Susan M. Sanchez & Thomas W. Lucas & Thomas M. Cioppa, 2005. "State-of-the-Art Review: A User’s Guide to the Brave New World of Designing Simulation Experiments," INFORMS Journal on Computing, INFORMS, vol. 17(3), pages 263-289, August.
    11. Jason R. W. Merrick, 2009. "Bayesian Simulation and Decision Analysis: An Expository Survey," Decision Analysis, INFORMS, vol. 6(4), pages 222-238, December.
    12. Chun-Hung Chen & Donghai He & Michael Fu & Loo Hay Lee, 2008. "Efficient Simulation Budget Allocation for Selecting an Optimal Subset," INFORMS Journal on Computing, INFORMS, vol. 20(4), pages 579-595, November.
    13. Lee, Loo Hay & Chew, Ek Peng & Teng, Suyan & Chen, Yankai, 2008. "Multi-objective simulation-based evolutionary algorithm for an aircraft spare parts allocation problem," European Journal of Operational Research, Elsevier, vol. 189(2), pages 476-491, September.

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