Confidence Interval Estimation

Point Estimation of the output variables of a simulation

experiment is of limited use -

∗ if the variance is large, the actual "spread" of the

observed random variable will be large

∗ there is no estimate as to the degree of confidence one

can place in the point estimates that have been obtained

This is why Confidence Interval Estimation is required

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Random Variable is W with actual α = P{E{W} will lie in this range}

mean E{W} and observed mean WO
0.5∆w 0.5∆w
∆w = confidence interval
α = confidence level WO

The true mean E{W} of the random variable is expected to lie between
±0.5∆w of the calculated mean WO with a probability of α

or

On the average, we would be correct (α x 100) percent of the time, that

E{W} will indeed lie in the range (WO - 0.5∆w, WO+0.5∆w)

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