In this lecture, we review four different Variance Reduction Techniques (VRT's). Namely, we discuss common random numbers (CRNs), control variates, antithetic variates (AVs), and importance sampling. Each one of these is a different approach to reducing the variance in the estimation of relative or absolute performance of a simulation model. Variance reduction is an alternative way to increase the power of a simulation that is hopefully less costly than increasing the number of replications.

We wrap up with a summary of the four VRT's that we have discussed in the class – Common Random Numbers (CRN's), Antithetic Variates (AV's), Importance Sampling, and Control Variates.