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Discrete Approximations of Probability Distributions

Author

Listed:
  • Allen C. Miller, III

    (Practical Innovations, Inc., Sunnyvale, California)

  • Thomas R. Rice

    (ANR Technology Co., Detroit)

Abstract

Practical limits on the size of most probabilistic models require that probability distributions be approximated by a few representative values and associated probabilities. This paper demonstrates that methods commonly used to determine discrete approximations of probability distributions systematically underestimate the moments of the original distribution. A new procedure based on gaussian quadrature is developed in this paper. It can be used to decrease the error in the approximation to any desired level.

Suggested Citation

  • Allen C. Miller, III & Thomas R. Rice, 1983. "Discrete Approximations of Probability Distributions," Management Science, INFORMS, vol. 29(3), pages 352-362, March.
    • Handle: RePEc:inm:ormnsc:v:29:y:1983:i:3:p:352-362
    DOI: 10.1287/mnsc.29.3.352
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