Renewal Theory

Def. A stochastic process {N(t), t 0} is said to be a counting

process if N(t) represents the total number of events that have
occurred up to time t.
X
1
, X
2
, . . . times between the events (arrivals).
S
n
= X
1
+ +X
n
the time of the nth event
Example. Poisson process
Denition implies:
(i) N(t) 0
(ii) N(t) is integer valued
(iii) If s < t, then N(s) N(t)
(iv) For s < t, N(t) N(s) equals the number of events in (s, t].
1
Poisson process
Def. The counting process {N(t), t 0} is called a Poisson process
with rate , if X
1
, X
2
, . . . are independent and have a common
exponential distribution
P(X
n
x) = 1 e
x
, x 0.
Examples: sequence of phone calls, trac, machine failures, . . .
For the Poisson process, P(N(t) = n) = e
t
(t)
n
n!
, n = 0, 1, . . .
S
n
has an Erlang or Gamma distribution: f
S
n
(t) = e
t
(t)
n1
(n 1)!
Expected number of events up to time t is m(t) = E[N(t)] = t
Naturally, is called the rate of the process
2
Renewal Process
Def. A counting process {N(t), t 0} with i.i.d. inter-arrival times
is called a renewal process
X
1
, X
2
, . . . - independent inter-arrival times with a common
distribution F
= E[X
n
], n 1
Ex. 1. Lifetimes of bulbs are i.i.d. A failed bulb is immediately
replaced by a new one. N(t) # bulbs failed by time t
Ex. 2. An inventory system has a stock u. The demands in
successive weeks 1, 2, . . . are i.i.d. The stock will be expired at week
N(u) + 1.
Let S
0
= 0, S
n
=

n
i=1
X
i
. We have:
N(t) = max{n : S
n
t} and N(t) < , t 0.
However, N(t) as t
3
Example 7.1
P(X
n
= i) = p(1 p)
i1
, geometric distribution, # trials until the
rst success. Then S
n
is # trials until the nth success
P(S
n
= k) =
_
k 1
n 1
_
p
n
(1 p)
kn
, k n
Hence,
P{N(t) = n} =
[t]

k=n
_
k 1
n 1
_
p
n
(1p)
kn

[t]

k=n+1
_
k 1
n 1
_
p
n+1
(1p)
kn1
Equivalently, since a renewal occurs w.p. p at 1, 2, . . ., we have
P{N(t) = n} =
_
[t]
n 1
_
p
n
(1 p)
[t]n
4
One-to-one correspondence b/w renewal process and its
mean-value function
The renewal function uniquely determines the renewal process
Example 7.2. Suppose we have a renewal process whose
mean-value function is given by
m(t) = 2t
What is the distribution of the # renewals occurring by time 10?
Solution. Since m(t) = 2t is the mean-value function of a Poisson
process with rate 2, it follows from the one-to-one correspondence
that N(10) has a Poisson distribution with parameter 20:
P{N(10) = n} = e
20
20
n
n!
, n 0
5
Example 7.3
Let X
1
, X
2
, . . . have uniform distribution on [0, 1], that is, f(x) = 1
if x [0, 1] and f(x) = 0 otherwise. We want to determine m(t) for
t 1. The renewal equation becomes:
m(t) = F(t) +
_
t
0
m(t x)f(x) dx = t +
_
t
0
m(t x) dx
= t +
_
t
0
m(y) dy
Dierentiating both sides: m

(t) = 1 +m(t)
Taking h(t) = 1 +m(t), we get: h

(t) = h(t) h(t) = Ke

t
Thus, m(t) = Ke
t
1. Since m(0) = 0, it follows that K = 1.
The answer:
m(t) = e
t
1, 0 t 1.
6
Limiting Theorems
N() = lim
t
N(t) = with probability 1. At which rate does
N(t) go to innity?
Proposition 7.1 (Strong Law of Large Numbers for N(t))With
probability 1,
N(t)
t

1

as t
(renewal process goes to innity at rate 1/)
Elementary Renewal Theorem
m(t)
t

1

as t
_
where
1

0
_
.
(renewal process goes to innity at average rate 1/)
7
Example 7.7
Single-server bank. Arrivals of customers: Poisson process (). A
customer enters the bank if the server is available. Otherwise, the
customer leaves. The service time has a distribution G. (a) What is
the rate at which customers enter the bank? (b) What proportion
of potential customers actually enter the bank?
Solution. (a) Renewal occurs when a customer enters a bank. Let

G
be the average service time. then =
G
+ 1/ (memory-less
property). The rate at which customers enter is 1/ = /(1 +
G
)
(b) Consider a process in discrete time, where 1, 2, . . . are successive
customers. The renewal corresponds to a customer who actually
entered the bank. Average number of customers in a cycle is
=
G
+ 1 (customers rejected during the service plus one
accepted customer). The rate is 1/(
G
+ 1).
8
Walds Equation
X
1
, X
2
, . . . i.i.d. N integer-valued r.v.
If N and X
1
, X
2
, . . . are independent, then
E(X
1
+ +X
N
) = E(X)E(N)
But independence is a too strong condition.
Def. An integer-valued random variable N is said to be a stopping
time for the sequence X
1
, X
2
, . . . if the event {N = n} is
independent of X
n+1
, X
n+2
, . . . for all n = 1, 2, . . ..
Theorem (Walds equation). If X
1
, X
2
, . . . are i.i.d with
E[X
n
] = E[X] < and N is a stopping time for X
1
, X
2
, . . . s.t.
E[N] < , then
E
_
N

n=1
X
n
_
= E[N]E[X]
9
Stopping times...
Def. An integer-valued random variable N is said to be a stopping
time for the sequence X
1
, X
2
, . . . if the event {N = n} is
independent of X
n+1
, X
n+2
, . . . for all n = 1, 2, . . .. {N(t), t 0}
renewal process
X
1
, X
2
, . . . inter-arrival times
Which of the following are stopping times?
N=5
N is independent of X
1
, X
2
, . . . (e.g. geometric with par-r p)
N = N(10)
N = N(10) + 1
N = N(t)
N = N(t) + 1
10
Renewal application of Walds equation
X
1
, X
2
, . . . inter-arrival times
N(t) + 1 is a stopping time: the rst renewal after t.
N(t) + 1 = n X
1
+ +X
n1
t, X
1
+ +X
n
> t
The event {N(t) + 1 = n} does not depend on X
n+1
, X
n+2
, . . ..
Hence,
E[X
1
+ +X
N(t)+1
] = E[X]E[N(t) + 1]
Proposition 7.2. If = E(X) < , then
E(S
N(t)+1
) = (m(t) + 1)
or (m(t) + 1) = t +E[Y (t)], where Y (t) is the excess time.
11
Example 7.9
First, use element of type 1, lifetime is exponential with par-r
1
.
Then use element of type 2, lifetime is exponential with par-r
2
.
Then replace the machine. Find the av. # machines used by time t
Solution. Let X(t) = 1, 2 be the type of the element used at time
t. Then {X(t), t 0} is a continuous time Markov chain, thus, at
time t, the element 1 is in use w.p. (Example 6.11)
P
11
(t) =

1

1
+
2
e
(
1
+
2
)t
+

1

1
+
2
Further, for our renewal process, = 1/
1
+ 1/
2
and
Y (t) = (1/
1
+ 1/
2
)P
11
(t) + (1/
2
)(1 P
11
(t))
Combining everything together, we get
m(t) =
t

+
E[Y (t)]

1 =

1

1
+
2
t

1

1
+
2
[1 e
(
1
+
2
)t
]
12
Asymptotic Normality of N(t)
Central Limit Theorem for Renewal Processes. Let and

2
, assumed nite, represent the mean and variance of an
inter-arrival time. Then
P
_
N(t) t/

_
t/
3
< y
_

2
_
y

e
x
2
/2
dx
as t .
13
Example 7.10.
Processing times by machines 1 and 2 have a Gamma distribution
with par-s n = 4, = 2, and uniform [0,4] distribution,
respectively. Approximate the prob-ty that the two machines
together complete at least 90 jobs by time t = 100
Solution. We have
1
= 2,
2
1
= 1,
2
= 2,
2
2
= 16/12. Thus,
N
1
(100) +N
2
(100) N(50 + 50, 100/8 + 100/6) = N(100, 175/6)
P{N
1
(100)+N
2
(100) > 89.5} = P
_
N
1
(100) +N
2
(100) 100
_
175/6
>
89.5 100
_
175/6
_
1
_
10
_
175/6
_
=
_
10
_
175/6
_
= (1.944) = 0.9741
where is a standard normal distr. function
14