Data Analytics for Decision Making

Topic 2: Probability and Discrete

Probability Distributions

2d. Decisions with Discrete

Random Variables
Outline
2. Probability
a) Introduction to Probability
b) Event Relations
c) Discrete Random Variables
d) Decisions with Discrete Random
Variables
» Using Mean and Standard Deviation
» Coefficient of Variation

Bond Business School Data Analytics for Decision Making – Topic 2d 2

Ski Example
• A ski resort operator must decide before the
winter season whether she will lease a snow-
making machine.
• If she has no machine, the weekly profit (X) will
be $20,000 if the weather is mild, $30,000 if it is
typical and $50,000 if it is severe.
• If she decides to lease the machine, the weekly
profits (Y) for these conditions will be $30,000,
$35,000 and $40,000 respectively.
• The probability of mild weather is 0.3, with a 0.5
chance of typical weather and a 0.2 chance of
severe weather.

Bond Business School Data Analytics for Decision Making – Topic 2d 3