Wednesday, 22 May 2013

probability - Expected value of the minimum of a non-negative random variable and a constant



X is a non-negative random variable. Define Y = MIN(X, c) where c is a constant. What is E[Y]?
I am modeling the constant as another random variable whose pdf is Dirac Delta function: fc(x):=δ(xc). The mean and variance of this "constant random variable"(!) comes out as c and 0, but does this approach have enough mathematical rigor?


Answer



Assume that c>0 otherwise min which is rather trivial. Then Y := \min(X,c) is a nonnegative variable and we have




\begin{align*} E[Y] &= \int_0^\infty P( Y > t) dt \\ &= \int_0^\infty P( X > t, c > t) dt \\ &= \int_0^\infty P( X > t)1\{ c > t\} dt \\ &= \int_0^c P(X > t)dt \end{align*}


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