channel fading coefficient, and $\{h[i]\}$ is a stationary and ergodic discrete-time process. We denote the magnitude-square of the fading coefficients by $z[i]=|h[i]|^2$.

In this paper, we initially consider the scenario in which the receiver has perfect channel side information and hence perfectly knows the instantaneous values of $\{h[i]\}$ while the transmitter has no such knowledge. Subsequently, we will analyze the effect of imperfect channel knowledge at the receiver. When the receiver perfectly knows the channel conditions, the instantaneous channel capacity with channel gain $z[i] \!\!= \!\!|h[i]|^2$ is $$\label{eq:shannon}
C[i]=B\log_2(1+{{\text{\footnotesize{SNR}}}}z[i]) \text{ bits/s}$$ where ${{\text{\footnotesize{SNR}}}}= {\bar{P}}/(N_{0}B)$ is the average transmitted signal-to-noise ratio. Since the transmitter is unaware of the channel conditions, information is transmitted at a fixed rate of $r$ bits/s. When $r < C$, the channel is considered to be in the ON state and reliable communication is achieved at this rate. If, on the other hand, $r \ge C$, outage occurs. In this case, channel is in the OFF state and reliable communication at the rate of $r$ bits/s cannot be attained. Hence, effective data rate is zero and information has to be resent. We assume that a simple automatic repeat request (ARQ) mechanism is incorporated in the communication protocol 