On Generating Multivariate Poisson Data in Management Science Applications

Yahav I. and Shmueli G., On Generating Multivariate Poisson Data in Management Science Applications (2011). Applied Stochastic Models in Business and Industry, 28(1), pp. 91-102. Wiley Online Library.

Robert H. Smith School Research Paper No. RHS 06-085

17 Pages Posted: 19 Aug 2009 Last revised: 18 Jan 2016

See all articles by Inbal Yahav

Inbal Yahav

Tel Aviv University - Coller School of Management

Galit Shmueli

Institute of Service Science, National Tsing Hua University, Taiwan

Date Written: August 18, 2009

Abstract

Generating multivariate Poisson random variables is essential in many applications, such as multi echelon supply chain systems, multi-item / multi-period pricing models, accident monitoring systems, etc. Current simulation methods suffer from limitations ranging from computational complexity to restrictions on the structure of the correlation matrix, and therefore are rarely used in management science. Instead, multivariate Poisson data are commonly approximated by either univariate Poisson or multivariate Normal data. However, these approximations are often not adequate in practice. In this paper, we propose a conceptually appealing correction for NORTA (NORmal To Anything) for generating multivariate Poisson data with a flexible correlation structure and rates. NORTA is based on simulating data from a multivariate Normal distribution and converting it to an arbitrary continuous distribution with a specific correlation matrix. We show that our method is both highly accurate and computationally efficient. We also show the managerial advantages of generating multivariate Poisson data over univariate Poisson or multivariate Normal data.

Suggested Citation

Yahav, Inbal and Shmueli, Galit, On Generating Multivariate Poisson Data in Management Science Applications (August 18, 2009). Yahav I. and Shmueli G., On Generating Multivariate Poisson Data in Management Science Applications (2011). Applied Stochastic Models in Business and Industry, 28(1), pp. 91-102. Wiley Online Library., Robert H. Smith School Research Paper No. RHS 06-085, Available at SSRN: https://ssrn.com/abstract=1457347 or http://dx.doi.org/10.2139/ssrn.1457347

Inbal Yahav

Tel Aviv University - Coller School of Management ( email )

Tel Aviv
Israel

Galit Shmueli (Contact Author)

Institute of Service Science, National Tsing Hua University, Taiwan ( email )

Hsinchu, 30013
Taiwan

HOME PAGE: http://www.iss.nthu.edu.tw

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