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• A variable can take multiple values (at least two different values).
• Some outcomes are more likely than others. The desirable outcomes are called
events, and the process of obtaining the outcomes is called an experiment.
Types of definitions:
1. Classical probability – number of outcomes where the events occur divided by the
total number of possible outcomes.
2. Relative frequency of occurrence.
3. Subjective probability.
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Probability
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Probability
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Basics of probability
• Venn diagram
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Quick Check
• You receive the newspaper of the day definitely after 5 A.M. and, on or before 8
A.M. everyday.
• Let event A be the event that the newspaper is received definitely after 6 A.M. Let
event B be the event that the newspaper is received before 7 A.M.
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Joint probability
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Conditional probability
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Example
• Consider a B-school which shortlisted 1200 candidates (960 men and 240 women)
for its post-graduate management program. Out of these, 324 candidates were
given offer letters for admission. The data is included here:
Men Women Total
Contingency
Offers made 288 36 324 table
Not offered 672 204 876
Total 960 240 1200
• After reviewing the record, a women’s forum raised the issue of gender
discrimination on the basis that 288 male candidates were offered admission against
only 36 female candidates.
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Example
• To this, the B-school management replied that it was not a case of discrimination,
but was because of the fact that only 240 women candidates appeared for the
examination.
Let us review the case using probability.
• Let M be the event that the candidate is a male.
• Let W be the event that the candidate is a woman.
• Let A be the event that the candidate is offered admission.
• Let Ac be the event that the candidate is not offered admission.
(Event Ac is called compliment of event A.
One can see that Pr(A) + Pr(Ac) = 1.)
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Example
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Example
• Joint probabilities (of what?) appear in the main body of the table (e.g. 0.24, 0.03).
• Marginal probabilities (of what?) appear in the margin of the table (e.g. 0.8, 0.2).
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Example
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Example
• Now, the numerator, 0.24 is the joint probability of events A and M. that is Pr(A∩M)
= 0.24. And 0.8 is the marginal probability of the event M, i.e. Pr(M) = 0.8.
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Example: Conclusion
• The probability of admission offer given the candidate is a male is 0.3, twice of 0.15
probability of admission offer given the candidate is a woman.
• Although the use of conditional probability does not, in itself, prove discrimination,
there is support for the argument!
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Baye’s rule
• Often we have initial guesses about an event from which we can calculate prior
probabilities, using the usual probability theory.
• Then, from sources such as data collection, sample, product field tests, we obtain
more information about these events.
• Given, this new information, we can update our prior beliefs by calculating revised
probabilities – this is called the posterior probability.
• Baye’s theorem is used to calculate the posterior probability if we have the initial
belief (probability) and the additional sample information.
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Baye’s rule
• Suppose that a manufacturer receives same raw material from two different
suppliers S1 and S2.
• Currently 65% of the raw material comes from S1 and remaining, 35%, comes from
S2.
• Also, suppose that from the historical data available with the quality assurance
department, we know that S1 has 98% of the supplied raw material of good quality
and S2 has 95% of the raw material of good quality.
• That is, the probability of a “Good” quality raw material given that the supplier is S1
is, Pr(G|S1) = 0.98. And for the second supplier, this probability is: Pr(G|S2) = 0.95.
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Baye’s rule
• What is the probability of the raw material being supplied by S1 and it being good?
• Joint probability, of course!
• This can be calculated using the Baye’s formula.
Pr(S1, G) = Pr(S1 ∩ G) = Pr(S1)*Pr(G|S1) = 0.65*0.98 = 0.637
Pr(S2, G) = Pr(S2 ∩ G) = Pr(S2)*Pr(G|S2) = 0.35*0.95 = 0.3325
• Now, knowing all this information so far, suppose the manufacturer inspects the
incoming raw material on receipt and finds a bad quality material.
• He wants to know the supplier who needs to be contacted to complain!
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Baye’s rule
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Baye’s rule
• What is Pr(B)?
• That is the probability of receiving a bad quality raw material.
• Now bad quality raw material can from supplies of S1 or S2.
• That is, the event B can occur with S1 or with S2.
Pr(B) = Pr(S1 ∩ B) + Pr(S2 ∩ B)
• But Pr(S1 ∩ B) = Pr(S1)*Pr(B|S1), and
• Pr(S2 ∩ B) = Pr(S2)*Pr(B|S2)
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Baye’s rule
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