Brief Description:

Bayes' Theorem is an extension of conditional probability

It gives the actual probability of an event given information of tests/previously calculated probab
Formula:
p(Bi|A) = p(A|Bi)*p(Bi)/(p(A|B1)*p(B1)+p(A|B2)*p(B2)+….+p(A|Bk)*p(Bk)

where Bi is the ith event out of k mutually exclusive and collectively exhaustive

Problem Statement:
Olive Construction Company is determining whether it should submit a bid for a new shopping ce
In the past, Olive's main competitor, has submitted bids 70% of the time.
If the competitor does not bid on a job, the probability that Olive Construction Company will get
If the competitor bids on a job, the probability that Olive Construction Company will get the job i
If Olive Construction Company gets the job, what is the probability that the competitor did not b

Define each value provided:

Let A be an event that Olive Construction Company gets the job
Let B1 be an event that competitor submits a bid
Let B2 be an event that competitor does not submit a bid
Hence, B1 and B2 events are mutually exclusive and collectively exhaustive
Given:
p(B1) 0.7 i.e. In the past, Olive's main competitor, has sub
p(B2) 0.3 i.e. 1 - p(B1)
p(A|B2) 0.5 i.e. Given the competitor does not bid on a job,
p(A|B1) 0.25 i.e. Given the competitor bids on a job, the prob

What is needed?
p(B2|A) i.e. Given Olive Construction Company gets the job, what is the proba

Solution with calculation:

p(B2|A) = p(A|B2)*p(B2)/(p(A|B1)*p(B1)+p(A|B2)*p(B2)

Numerator calculation using above formula

p(A|B2)*p(B2) 0.15
Denominator calculation using above formula
(p(A|B1)*p(B1)+p(A|B2)*p(B2) 0.325
Therefore
p(B2|A) 0.4615 i.e. Numerator/Denominator

Learning:
Whenever a reverse conditional probability of events is being asked and the actual conditional pr
reviously calculated probabilities

and collectively exhaustive events

a bid for a new shopping center.

struction Company will get the job is 0.50

Company will get the job is 0.25
at the competitor did not bid?

's main competitor, has submitted bids 70% of the time.

titor does not bid on a job, the probability that Olive Construction Company will get the job is 0.50
titor bids on a job, the probability that Olive Construction Company will get the job is 0.25

s the job, what is the probability that the competitor did not bid

Solution through Contengency Table

Olive Getting job
Yes No Total
Competitior Yes 35 105 140
Bid No 30 30 60
Total 65 135 200
Final Answer 0.4615

nd the actual conditional probability is known Bayes' Theorem can be applied