Custom Distribution Example 1

  Before beginning example one, open the Custom Distribution dialog as follows:

  1. Click cell D11.

  2. Select Define, then Define Assumption.

    The Distribution Gallery dialog opens.

  3. Click the All category to select it.

  4. Scroll to find the custom distribution, then click it.

  5. Click OK.

    Crystal Ball displays the Define Assumption dialog.

    Figure 110. Define Assumption Dialog for Custom Distributions

    This figure displays the Define Assumption dialog for custom distributions.

Using the custom distribution, a company can describe the probable retail cost of a new product. The company decides the cost could be $5, $8, or $10. In this example, you will use the custom distribution to describe a series of single values.

  To enter the parameters of this custom distribution:

  1. Type 5 in the Value field and click Enter.

    Since you do not specify a probability, Crystal Ball defaults to a  relative probability of 1.00 for the value 5. A single value bar displays the value 5.00.

    Relative probability means that the sum of the probabilities does not have to add up to 1. So the probability for a given value is meaningless by itself; it makes sense only in relation to the total relative probability. For example, if the total relative probability is 3 and the relative probability for a given value is 1, the value has a probability of 0.33.

  2. Type 8 in the Value field.

  3. Click Enter.

    Since you did not specify a probability, Crystal Ball defaults to a relative probability of 1.00 (displayed on the Probability scale along the first vertical axis) for the value 8. A second value bar represents the value 8.

  4. Type 10 in the Value field.

  5. Click Enter.

    Crystal Ball displays a relative probability of 1.00 for the value 10. A third single value bar represents the value 10.

    Figure 111, Single Values shows the value bars for the values 5, 8, and 10, each with a relative probability of 1.00.

    Figure 111. Single Values

    This figure displays single values in a custom distribution.

Now, each value has a probability of 1. However, when you run the simulation, their total relative probability becomes 1.00 and the probability of each value is reset to .3333.

  To reset their probabilities before you run the simulation, follow these steps:

  1. Click the bar with a value of 5.00.

    Its value is displayed in the Value field.

  2. Type the probability as the formula =1/3 in the Probability field and click Enter.

    You could also enter a decimal — for example, 0.333333 — but the formula is more exact.

  3. Follow steps 6 and 7 for the other two bars.

    Crystal Ball rescales each value to a relative probability of 0.33 on the Relative Probability scale along the first vertical axis (Figure 112, Single Values with Adjusted Probabilities).

    Figure 112. Single Values with Adjusted Probabilities

    This figure displays single values in a custom distribution, with adjusted probabilities.