When used in statistical estimation is external to the main sample information relevant to a characteristic of a random variable. The sources of additional information include expert opinions, experimental settings, and external to the main sample sources of additional observations. Examples of additional information: exact knowledge of a distributional quantile, symmetry of a distribution, ranges of possibly values of random variables, a quantile estimate from an external data source available with its standard error.
Published in Chapter:
Economic Order Quantity Estimation with Uncertain External Information on Product Demand Quantile
Copyright: © 2023
|Pages: 13
DOI: 10.4018/978-1-6684-8474-6.ch008
Abstract
In this chapter, a more accurate method for estimating economic order quantity (EOQ) is suggested. This method improves accuracy by using uncertain external additional information about market demand. External additional information can be available in form of summary statistics (sample means, sample quantiles) and their uncertainty measures (confidence intervals, widths of confidence intervals, standard errors, sample variances, or sample standard deviations). Annual demand was estimated by average sales and improved with the use of uncertain quantile information. It is shown that uncertain additional information can reduce variance of the estimator. This new approach is illustrated using sales data of midsize retail company.