In management science simulation refers to a technique to perform experiments using predefined models. In a simulation experiment real-world situations are incorporated in a model in order to investigate the consequences of changing different aspects of a real-life business environment.
Simulation allows manager to answer "what-if" questions.
The Monte Carlo method of simulation is a well known and widely applied method when the events under analysis follow some probability distribution.
Turban, E. and J.R. Meredith (1985): Fundamentals of Management Science. Third Edition Business Publications, Inc.
Render, B. and R.M. Stair, Jr. (1997): Quantitative Analysis for Management. Sixth Edition. Prentice Hall.