Chapter Six

Probability

Copyright 2005 Brooks/Cole, a division of Thomson Learning, Inc.

6.1

Random Experiment
arandomexperimentisanactionorprocessthatleadsto
oneofseveralpossibleoutcomes.Forexample:
Experiment

Outcomes

Flipacoin

Heads,Tails

ExamMarks

Numbers:0,1,2,...,100

AssemblyTime

t>0seconds

CourseGrades

F,D,C,B,A,A+

Copyright 2005 Brooks/Cole, a division of Thomson Learning, Inc.

Probabilities
Listtheoutcomesofarandomexperiment
List:CalledtheSampleSpace
Outcomes:CalledtheSimpleEvents

Thislistmustbeexhaustive,i.e.ALLpossibleoutcomes
included.
Dieroll{1,2,3,4,5}
Dieroll{1,2,3,4,5,6}
Thelistmustbemutuallyexclusive,i.e.notwo
outcomescanoccuratthesametime:
Dieroll{oddnumberorevennumber}
Dieroll{numberlessthan4orevennumber}
Copyright 2005 Brooks/Cole, a division of Thomson Learning, Inc.

Sample Space
Alistofexhaustive[dontleaveanythingout]andmutually
exclusiveoutcomes[impossiblefor2differenteventsto
occurinthesameexperiment]iscalledasamplespaceandis
denotedbyS.
TheoutcomesaredenotedbyO1,O2,,Ok
Usingnotationfromsettheory,wecanrepresentthesample
spaceanditsoutcomesas:

S={O1,O2,,Ok}
Copyright 2005 Brooks/Cole, a division of Thomson Learning, Inc.

Requirements of Probabilities
GivenasamplespaceS={O1,O2,,Ok},theprobabilities
assignedtotheoutcomemustsatisfytheserequirements:
(1) Theprobabilityofanyoutcomeisbetween0and1
i.e.0P(Oi)1foreachi,and
(2) Thesumoftheprobabilitiesofalltheoutcomesequals1
i.e.P(O1)+P(O2)++P(Ok)=1
P(Oi)representstheprobabilityofoutcomei

Copyright 2005 Brooks/Cole, a division of Thomson Learning, Inc.

Approaches to Assigning
Probabilities
Therearethreewaystoassignaprobability,P(Oi),toan
outcome,Oi,namely:

Classicalapproach:makecertainassumptions(suchas
equallylikely,independence)aboutsituation.
Relativefrequency:assigningprobabilitiesbasedon
experimentationorhistoricaldata.
Subjectiveapproach:Assigningprobabilitiesbasedonthe
assignorsjudgment.[Bayesian]
Copyright 2005 Brooks/Cole, a division of Thomson Learning, Inc.

Classical Approach
Ifanexperimenthasnpossibleoutcomes[allequallylikely
tooccur],thismethodwouldassignaprobabilityof1/nto
eachoutcome.
Experiment:
SampleSpace:
Probabilities:

Rollingadie
S={1,2,3,4,5,6}
Eachsamplepointhasa1/6chanceof
occurring.
Whataboutrandomlyselectingastudentandobservingtheir
gender?S={Male,Female}
Aretheseprobabilities?
Copyright 2005 Brooks/Cole, a division of Thomson Learning, Inc.

Classical Approach
Experiment:Rolling2die[dice]andsumming2numbers
ontop.
What are the
SampleSpace:S={2,3,,12}
underlying, unstated
ProbabilityExamples:
assumptions??
P(2)=1/36
1
2
3
4
5
6
P(7)=6/36
P(10)=3/36

Copyright 2005 Brooks/Cole, a division of Thomson Learning, Inc.

10

10

11

10

11

12

Relative Frequency Approach

Bits&BytesComputerShoptracksthenumberofdesktop
computersystemsitsellsoveramonth(30days):
Forexample,
10daysoutof30
2desktopsweresold.

DesktopsSold

#ofDays

10

12

Fromthiswecanconstruct
theestimatedprobabilitiesofanevent 4
(i.e.the#ofdesktopsoldonagivenday)
Copyright 2005 Brooks/Cole, a division of Thomson Learning, Inc.

Relative Frequency Approach

DesktopsSold[X]

#ofDays

DesktopsSold

1/30 = .03 =P(X=0)

2/30 = .07 =
P(X=1)

10

10/30 = .33 =
P(X=2)

12

12/30 = .40 =
P(X=3)

5/30 = .17 =
P(X=4)

3
4

= 1.00
Thereisa40%chanceBits&Byteswillsell3desktopsonanygiven
day[Basedonestimatesobtainedfromsampleof30days]
Copyright 2005 Brooks/Cole, a division of Thomson Learning, Inc.

Subjective Approach
Inthesubjectiveapproachwedefineprobabilityasthe
degreeofbeliefthatweholdintheoccurrenceofanevent
P(youdropthiscourse)
P(NASAsuccessfullylandamanonthemoon)
P(girlfriendsaysyeswhenyouaskhertomarryyou)

Copyright 2005 Brooks/Cole, a division of Thomson Learning, Inc.

Events & Probabilities

Anindividualoutcomeofasamplespaceiscalledasimple
event[cannotbreakitdownintoseveralotherevents],
Aneventisacollectionorsetofoneormoresimpleevents
inasamplespace.
Rollofadie:S={1,2,3,4,5,6}
Simpleevent:thenumber3willberolled
Event:anevennumber(oneof2,4,or6)willberolled

Copyright 2005 Brooks/Cole, a division of Thomson Learning, Inc.

Events & Probabilities

Theprobabilityofaneventisthesumoftheprobabilitiesof
thesimpleeventsthatconstitutetheevent.
E.g.(assumingafairdie)S={1,2,3,4,5,6}and
P(1)=P(2)=P(3)=P(4)=P(5)=P(6)=1/6
Then:
P(EVEN)=P(2)+P(4)+P(6)=1/6+1/6+1/6=3/6=1/2

Copyright 2005 Brooks/Cole, a division of Thomson Learning, Inc.

Interpreting Probability
Onewaytointerpretprobabilityisthis:
Ifarandomexperimentisrepeatedaninfinitenumberof
times,therelativefrequencyforanygivenoutcomeisthe
probabilityofthisoutcome.
Forexample,theprobabilityofheadsinflipofabalanced
coinis.5,determinedusingtheclassicalapproach.The
probabilityisinterpretedasbeingthelongtermrelative
frequencyofheadsifthecoinisflippedaninfinitenumber
oftimes.
Copyright 2005 Brooks/Cole, a division of Thomson Learning, Inc.

Joint, Marginal, Conditional

Probability
Westudymethodstodetermineprobabilitiesofeventsthat
resultfromcombiningothereventsinvariousways.

Thereareseveraltypesofcombinationsandrelationships
betweenevents:
Complementofanevent[everythingotherthanthatevent]
Intersectionoftwoevents[eventAandeventB]or[A*B]
Unionoftwoevents[eventAoreventB]or[A+B]

Copyright 2005 Brooks/Cole, a division of Thomson Learning, Inc.

Example 6.1
Whyaresomemutualfundmanagersmoresuccessfulthan
others?Onepossiblefactoriswherethemanagerearnedhis
orherMBA.Thefollowingtablecomparesmutualfund
performanceagainsttherankingoftheschoolwherethe
fundmanagerearnedtheirMBA:Wheredowegetthese
probabilitiesfrom?[populationorsample?]
Mutual fund outperforms
the market

Mutual fund doesnt

outperform the market

Top 20 MBA program

.11

.29

Not top 20 MBA program

.06

.54

E.g. This is the probability that a mutual

fund outperforms AND the manager
was in a top-20 MBA program; its a
joint probability [intersection].

VennDiagrams
Copyright 2005 Brooks/Cole, a division of Thomson Learning, Inc.

Example 6.1
Alternatively,wecouldintroduceshorthandnotationto
representtheevents:
A1=Fundmanagergraduatedfromatop20MBAprogram
A2=Fundmanagerdidnotgraduatefromatop20MBAprogram
B1=Fundoutperformsthemarket
B2=Funddoesnotoutperformthemarket

B1

B2

A1

.11

.29

A2

.06

.54

E.g.P(A2andB1)=.06
=theprobabilityafundoutperformsthemarket
andthemanagerisntfromatop20school.
Copyright 2005 Brooks/Cole, a division of Thomson Learning, Inc.

Marginal Probabilities
Marginalprobabilitiesarecomputedbyaddingacrossrows
anddowncolumns;thatistheyarecalculatedinthemargins
ofthetable:
P(A2)=.06+.54

whatstheprobabilityafund
managerisntfromatopschool?

B1

B2

P(Ai)

A1

.11

.29

.40

A2

.06

.54

.60

P(Bj)

.17

.83

1.00

P(B1)=.11+.06
whatstheprobabilityafund
outperformsthemarket?
Copyright 2005 Brooks/Cole, a division of Thomson Learning, Inc.

BOTHmarginsmustaddto1
(usefulerrorcheck)

Conditional Probability
Conditionalprobabilityisusedtodeterminehowtwoevents
arerelated;thatis,wecandeterminetheprobabilityofone
eventgiventheoccurrenceofanotherrelatedevent.
Experiment:randomselectonestudentinclass.
P(randomlyselectedstudentismale)=
P(randomlyselectedstudentismale/studentison3rdrow)=
ConditionalprobabilitiesarewrittenasP(A|B)andreadas
theprobabilityofAgivenBandiscalculatedas:

Copyright 2005 Brooks/Cole, a division of Thomson Learning, Inc.

Conditional Probability
Again,theprobabilityofaneventgiventhatanotherevent
hasoccurrediscalledaconditionalprobability

P(AandB)=P(A)*P(B/A)=P(B)*P(A/B)botharetrue
Keepthisinmind!
Copyright 2005 Brooks/Cole, a division of Thomson Learning, Inc.

Conditional Probability
Example6.2Whatstheprobabilitythatafundwill
outperformthemarketgiventhatthemanagergraduated
fromatop20MBAprogram?
Recall:
A1=Fundmanagergraduatedfromatop20MBAprogram
A2=Fundmanagerdidnotgraduatefromatop20MBAprogram
B1=Fundoutperformsthemarket
B2=Funddoesnotoutperformthemarket

Thus,wewanttoknowwhatisP(B1|A1)?

Copyright 2005 Brooks/Cole, a division of Thomson Learning, Inc.

Conditional Probability
WewanttocalculateP(B1|A1)
B1

B2

P(Ai)

A1

.11

.29

.40

A2

.06

.54

.60

P(Bj)

.17

.83

1.00

Thus,thereisa27.5%chancethatthatafundwilloutperformthemarket
giventhatthemanagergraduatedfromatop20MBAprogram.
Copyright 2005 Brooks/Cole, a division of Thomson Learning, Inc.

Independence
Oneoftheobjectivesofcalculatingconditionalprobability
istodeterminewhethertwoeventsarerelated.
Inparticular,wewouldliketoknowwhethertheyare
independent,thatis,iftheprobabilityofoneeventisnot
affectedbytheoccurrenceoftheotherevent.
TwoeventsAandBaresaidtobeindependentif
P(A|B)=P(A)
and
P(B|A)=P(B)
P(youhaveaflattiregoinghome/radioquitsworking)
Copyright 2005 Brooks/Cole, a division of Thomson Learning, Inc.

Independence
Forexample,wesawthat
P(B1|A1)=.275
ThemarginalprobabilityforB1is:P(B1)=0.17
SinceP(B1|A1)P(B1),B1andA1arenotindependentevents.
Statedanotherway,theyaredependent.Thatis,the
probabilityofoneevent(B1)isaffectedbytheoccurrenceof
theotherevent(A1).
Copyright 2005 Brooks/Cole, a division of Thomson Learning, Inc.

Union
Determinetheprobabilitythatafundoutperforms(B 1)
orthemanagergraduatedfromatop20MBAprogram(A 1).

A1orB1occurswhenever:
A1andB1occurs,A1andB2occurs,orA2andB1occurs

B1

B2

P(Ai)

A1

.11

.29

.40

A2

.06

.54

.60

P(Bj)

.17

.83

1.00

P(A1 or B1) = .11 + .06 + .29 = .46

Copyright 2005 Brooks/Cole, a division of Thomson Learning, Inc.

Probability Rules and Trees

Weintroducethreerulesthatenableustocalculatethe
probabilityofmorecomplexeventsfromtheprobabilityof
simplerevents
TheComplementRuleMaybeeasiertocalculatethe
probabilityofthecomplementofaneventandthensubstract
itfrom1.0togettheprobabilityoftheevent.
P(atleastoneheadwhenyouflipcoin100times)
=1P(0headswhenyouflipcoin100times)
TheMultiplicationRule:P(A*B)wayIwriteit
TheAdditionRule:P(A+B)wayIwriteit
Copyright 2005 Brooks/Cole, a division of Thomson Learning, Inc.

Example 6.5
Agraduatestatisticscoursehassevenmaleandthreefemale
students.Theprofessorwantstoselecttwostudentsat
randomtohelpherconductaresearchproject.Whatisthe
probabilitythatthetwostudentschosenarefemale?
P(F1*F2)=???
LetF1representtheeventthatthefirststudentisfemale
P(F1)=3/10=.30
Whataboutthesecondstudent?
P(F2/F1)=2/9=.22
P(F1*F2)=P(F1)*P(F2/F1)=(.30)*(.22)=0.066
NOTE:2eventsareNOTindependent.
Copyright 2005 Brooks/Cole, a division of Thomson Learning, Inc.

Example 6.6
TheprofessorinExample6.5isunavailable.Her
replacementwillteachtwoclasses.Hisstyleistoselectone
studentatrandomandpickonhimorherintheclass.What
istheprobabilitythatthetwostudentschosenarefemale?
Bothclasseshave3femaleand7malestudents.
P(F1*F2)=P(F1)*P(F2/F1)=P(F1)*P(F2)
=(3/10)*(3/10)=9/100=0.09
NOTE:2eventsAREindependent.
Copyright 2005 Brooks/Cole, a division of Thomson Learning, Inc.

Addition Rule
Additionruleprovidesawaytocomputetheprobabilityof
eventAorBorbothAandBoccurring;i.e.theunionofA
andB.
P(AorB)=P(A+B)=P(A)+P(B)P(AandB)
WhydowesubtractthejointprobabilityP(AandB)from
thesumoftheprobabilitiesofAandB?
P(AorB)=P(A)+P(B)P(AandB)
Copyright 2005 Brooks/Cole, a division of Thomson Learning, Inc.

Addition Rule
P(A1)=.11+.29=.40
P(B1)=.11+.06=.17
ByaddingP(A)plusP(B)weaddP(AandB)twice.TocorrectwesubtractP(Aand
B)fromP(A)+P(B)

B1
A1

B1

B2

P(Ai)

A1

.11

.29

.40

A2

.06

.54

.60

P(Bj)

.17

.83

1.00

(A1 or B1) = P(A) + P(B) P(A and B) = .40 + .17 - .11 = .46
Copyright 2005 Brooks/Cole, a division of Thomson Learning, Inc.

Addition Rule for Mutually Excusive

Events

IfandAandBaremutuallyexclusivetheoccurrenceofone
eventmakestheotheroneimpossible.Thismeansthat
P(AandB)=P(A*B)=0
Theadditionruleformutuallyexclusiveeventsis
P(AorB)=P(A)+P(B)
OnlyifAandBareMutuallyExclusive.

Copyright 2005 Brooks/Cole, a division of Thomson Learning, Inc.

Example 6.7
Inalargecity,twonewspapersarepublished,theSunand
thePost.Thecirculationdepartmentsreportthat22%ofthe
cityshouseholdshaveasubscriptiontotheSunand35%
subscribetothePost.Asurveyrevealsthat6%ofall
householdssubscribetobothnewspapers.Whatproportion
ofthecityshouseholdssubscribetoeithernewspaper?
Thatis,whatistheprobabilityofselectingahouseholdat
randomthatsubscribestotheSunorthePostorboth?
P(SunorPost)=P(Sun)+P(Post)P(SunandPost)
=.22+.35.06=.51
Copyright 2005 Brooks/Cole, a division of Thomson Learning, Inc.

Probability Trees [Decision Trees]

Aprobabilitytreeisasimpleandeffectivemethodofapplyingthe
probabilityrulesbyrepresentingeventsinanexperimentbylines.The
resultingfigureresemblesatree.
This is P(F), the probability of
selecting a female student
first

First selection

Second selection
)=
P(F|F

/1
3
=
P(F)
P( M
)
This is P(F|F), the probability
of selecting a female student
second, given that a female
was already chosen first

Copyright 2005 Brooks/Cole, a division of Thomson Learning, Inc.

= 7/1
0

P( M|F
)

2/9

= 7/9

= 3/
)
M
|
P(F
P( M|M
)

= 6/9

Probability Trees
Attheendsofthebranches,wecalculatejoint
probabilitiesastheproductoftheindividualprobabilities
ontheprecedingbranches.
First selection

Second selection
2/9
=
)
F
|
P( F

/1
3
=
P(F)

P( M
)=7
/10

P( M|F
)

P(FF)=(3/10)(2/9)

= 7/9

P(FM)=(3/10)(7/9)

P(MF)=(7/10)(3/9)

= 6/9

P(MM)=(7/10)(6/9)

= 3/
)
M
|
P( F
P( M|M
)

SampleSpace:[F1*F2,F1*M2,M1*F2,M1*M2]
Copyright 2005 Brooks/Cole, a division of Thomson Learning, Inc.

Joint probabilities

Probability Trees
Note:thereisnorequirementthatthebranchessplitsbe
binary,northatthetreeonlygoestwolevelsdeep,orthat
therebethesamenumberofsplitsateachsubnode

Copyright 2005 Brooks/Cole, a division of Thomson Learning, Inc.

Example 6.8
Lawschoolgradsmustpassabarexam.Supposepassrateforfirst
timetesttakersis72%.Theycanrewriteiftheyfailand88%pass
theirsecondattempt[P(passtake2/failtake1)].Whatisthe
probabilitythatarandomlygradpassesthebar?[samplespace?]
P(Pass) = .72

First exam
.
=
)
s
s
P(Pa

72

P( Fa
il) =
.2

Second exam

.88
=
)
l
i
a
s| F
P(Pas

P( Fa
il

Copyright 2005 Brooks/Cole, a division of Thomson Learning, Inc.

|Fail)

= .12

P(Fail and Pass)=

(.28)(.88)=.2464

P(Fail and Fail) =

(.28)(.12) = .0336

Bayes Law
BayesLawisnamedforThomasBayes,aneighteenth
centurymathematician.
Initsmostbasicform,ifweknowP(B|A),
wecanapplyBayesLawtodetermineP(A|B)

P(B|A)

P(A|B)
forexample

Copyright 2005 Brooks/Cole, a division of Thomson Learning, Inc.

Breaking News: New test for early detection of cancer has been
developed.
Let
C=eventthatpatienthascancer
Cc=eventthatpatientdoesnothavecancer
+=eventthatthetestindicatesapatienthascancer
=eventthatthetestindicatesthatpatientdoesnothavecancer
Clinicaltrialsindicatethatthetestisaccurate95%ofthetimeindetectingcancerfor
thosepatientswhoactuallyhavecancer:P(+/C)=.95
butunfortunatelywillgivea+8%ofthetimeforthosepatientswhoareknown
nottohavecancer:P(+/Cc)=.08
Ithasalsobeenestimatedthatapproximately10%ofthepopulationhavecancerand
dontknowityet:P(C)=.10

Youtakethetestandreceivea+testresults.Shouldyou
beworried?P(C/+)=?????
Copyright 2005 Brooks/Cole, a division of Thomson Learning, Inc.

What we know.
P(+/C) = .95
P(+/ Cc ) = .08
P(C) = .10
From these probabilities we can find
P(-/C) = .05
P(-/ Cc ) = .92
P(Cc) = .90

Copyright 2005 Brooks/Cole, a division of Thomson Learning, Inc.

Bayesian Terminology
TheprobabilitiesP(A)andP(AC)arecalledprior
probabilitiesbecausetheyaredeterminedpriortothe
decisionabouttakingthepreparatorycourse.
TheconditionalprobabilityP(A|B)iscalledaposterior
probability(orrevisedprobability),becausetheprior
probabilityisrevisedafterthedecisionabouttakingthe
preparatorycourse.

Copyright 2005 Brooks/Cole, a division of Thomson Learning, Inc.

Students Work Bayes Problem

The Rapid Test is used to determine whether someone has
HIV[H].Thefalsepositiveandfalsenegativeratesare0.05
P(+/Hc)and0.09P(/H)respectively.
The doctor just received a positive test results on one of
theirpatients[assumedtobeinalowriskgroupforHIV].
Thelowriskgroupisknowntohavea6%P(H)probability
of having HIV. What is the probability that this patient
actuallyhasHIV[aftertheytestedpositive].Feelfreetouse
atabletoworkthisproblem
P(H)=0.06****P(Hc)=?
P(+/Hc)=0.05****P(/Hc)=?
P(/H)=0.09****P(+/H)=?
Copyright 2005 Brooks/Cole, a division of Thomson Learning, Inc.

Students Work Bayes Problem

Transplantoperationsforheartshavetheriskthatthebodymayreject
theorgan.Anewtesthasbeendevelopedtodetectearlywarning
signsthatthebodymayberejectingtheheart.However,thetestisnot
perfect.Whenthetestisconductedonsomeonewhoseheartwillbe
rejected,approximatelytwooutoftentestswillbenegative(thetestis
wrong).Whenthetestisconductedonapersonwhoseheartwillnot
berejected,10%willshowapositivetestresult(anotherincorrect
result).Doctorsknowthatinabout50%ofhearttransplantsthebody
triestorejecttheorgan.
*Supposethetestwasperformedonmymotherandthetestispositive
(indicatingearlywarningsignsofrejection).Whatistheprobabilitythatthe
bodyisattemptingtorejecttheheart?
*Supposethetestwasperformedonmymotherandthetestisnegative
(indicatingnosignsofrejection).Whatistheprobabilitythatthebodyis
attemptingtorejecttheheart?
Copyright 2005 Brooks/Cole, a division of Thomson Learning, Inc.