(eBook PDF) Vital Statistics: Probability

and Statistics for Economics and

Business
Visit to download the full and correct content document:
https://ebooksecure.com/download/ebook-pdf-vital-statistics-probability-and-statistics-
for-economics-and-business/
Contents

Asterisks indicate sections tangential to the main line of argument.

Preface for Students xxvii

Preface for Instructors xxix
Supplements xxxv
Acknowledgments xxxvii

1. Random Reasoning 1
1.1 Introduction 1
1.2 Probability 2
1.3 Statistics 7
1.4 Conclusion 10

2. Probability Models 11
2.1 Ex Ante vs. Ex Post 12
2.2 Sample Spaces 14
2.2.1 Sample spaces, outcomes, and events 14
2.2.2 New events from old 16
2.3 Probability Measures 18
2.3.1 The axioms of probability 18
2.3.2 Further properties of probability measures 20
2.3.3 Interpreting and assigning probabilities 23
2.4 Conditional Probability 24
2.4.1 What is conditional probability? 25
2.4.2 Joint, marginal, and conditional probabilities 29
2.4.3 The total probability rule 30
2.4.4 Bayes’ rule 31

vii
viii Contents

2.5 Independence 36
2.5.1 Independence of pairs of events 36
2.5.2 Independence of many events 38
2.5.3 Independence of many events: A formal treatment* 41
2.6 Constructing Probability Models* 44
2.6.1 Two probability problems 44
2.6.2 Discussion of the Linda problem 45
2.6.3 Discussion of the Monty Hall problem 46
2.A Appendix: Finite and Countable Additivity 50
2.E Exercises 51

3. Random Variables 65
3.1 Random Variables 65
3.1.1 What exactly is a random variable? 66
3.1.2 Ex ante vs. ex post revisited 68
3.1.3 The distribution of a random variable 68
3.2 Traits of Random Variables 70
3.2.1 Expected value 70
3.2.2 Variance and standard deviation 73
3.2.3 An alternate formula for expected values* 77
3.3 Functions of Random Variables 79
3.4 Independent Random Variables 86
3.4.1 Independence of two random variables 86
3.4.2 Independence of many random variables 88
3.4.3 Sums of independent random variables 89
3.4.4 New independent random variables from old 93
3.E Exercises 95

4. Multiple Random Variables 106

4.1 Multiple Random Variables 106
4.1.1 Joint distributions and marginal distributions 108
4.1.2 Conditional distributions 110
4.1.3 Conditional traits and the law of iterated expectations 112
 Contents ix

4.2 Traits of Random Variable Pairs 114

4.2.1 Covariance 114
4.2.2 Correlation 116
4.2.3 Some useful facts 120
4.2.4 Independence and zero correlation 121
4.3 Functions of Multiple Random Variables 123
4.4 Portfolio Selection* 127
4.4.1 A simple model of a financial market 127
4.4.2 Portfolio selection and diversification 128
4.4.3 Efficient portfolios 131
4.4.4 The benefits of diversification 133
4.A Appendix 138
4.A.1 Definitions, formulas, and facts about random variables 138
4.A.2 Derivations of formulas and facts 141
4.B The Capital Asset Pricing Model online
4.E Exercises 145

Bernoulli Trials Processes and Discrete

5. Distributions 158
5.1 Families of Distributions 159
5.1.1 Indicator random variables 159
5.1.2 Bernoulli distributions 160
5.1.3 Traits of Bernoulli random variables 161
5.2 Bernoulli Trials Processes 163
5.3 How to Count 165
5.3.1 Choice sequences 165
5.3.2 Orderings 166
5.3.3 Permutations 167
5.3.4 Combinations 169
5.4 Binomial Distributions 170
5.4.1 Definition 171
5.4.2 Another way to represent binomial distributions 174
5.4.3 Traits of binomial random variables 175
x Contents

5.5 Simulation and Mathematical Analysis of Probability Models* 177

5.5.1 The birthday problem 177
5.5.2 Simulations 177
5.5.3 Mathematical analysis 178
5.5.4 Simulation versus mathematical analysis 180
5.E Exercises 181

6. Continuous Random Variables and Distributions 191

6.1 Continuous Probability Models 192
6.1.1 Why bother with continuous probability models? 192
6.1.2 “Probability zero” and “impossible” 192
6.2 Continuous Random Variables and Distributions 194
6.2.1 Cumulative probabilities 194
6.2.2 Density functions 197
6.2.3 Density functions: Intuition 204
6.2.4 Percentiles of continuous distributions 205
6.2.5 Traits of continuous random variables 206
6.3 Uniform Distributions 206
6.3.1 Definition 207
6.3.2 Traits 209
6.3.3 Shifting and scaling 209
6.4 Normal Distributions 212
6.4.1 Shifting, scaling, and the standard normal distribution 212
6.4.2 Standard normal probabilities 214
6.4.3 Normal probabilities 217
6.5 Calculating Normal Probabilities Using the Table 220
6.5.1 The standard normal distribution table 221
6.5.2 Calculating standard normal probabilities 223
6.5.3 Calculating normal probabilities 225
6.6 Sums of Independent Normal Random Variables 228
6.6.1 Distributions of sums of independent random variables 228
6.6.2 Brownian motion* 231
 Contents xi

6.A Continuous Distributions (using calculus) online

6.B Continuous Joint Distributions (using calculus) online
6.E Exercises 235

7. The Central Limit Theorem 248

7.1 I.I.D. Random Variables 249
7.2 Sums and Sample Means of I.I.D. Random Variables 252
7.2.1 Definition 252
7.2.2 Traits of sums and sample means of i.i.d. random variables 254
7.3 The Law of Large Numbers 258
7.3.1 Statement of the law of large numbers 258
7.3.2 The law of large numbers and the “law of averages” 260
7.3.3 Proving the law of large numbers* 261
7.4 The Central Limit Theorem 262
7.4.1 Convergence in distribution 263
7.4.2 Statement of the central limit theorem 264
7.4.3 Simulations with continuous trials 266
7.4.4 The continuity correction 269
7.4.5 Simulations with discrete trials 275
7.5 The Central Limit Theorem: Applications 276
7.5.1 Normal approximation of binomial distributions 276
7.5.2 Gambling 279
7.5.3 Queues 279
7.5.4 Statistical inference 282
7.A Proof of the Central Limit Theorem online
7.E Exercises 284

8. Poisson and Exponential Distributions 295

8.1 Poisson Distributions and the Poisson Limit Theorem 296
8.1.1 e 297
8.1.2 Poisson distributions 300
8.1.3 The Poisson limit theorem 303
xii Contents

8.2 Exponential Distributions 309

8.2.1 Definition 309
8.2.2 Probabilities and traits 311
8.2.3 Peculiar properties 313
8.3 The Exponential Interarrival Model and the Poisson Process* 318
8.A Appendix 321
8.E Exercises 322

9. The Psychology of Probability 332

9.1 Thought Experiments 334
9.2 Framing Effects 335
9.3 Overconfidence 339
9.4 Misestimating the Impact of Evidence 342
9.5 The “Law of Small Numbers” 345
9.6 Gambling Systems and Technical Trading Strategies 351
9.E Exercises 356

10. How to Lie with Statistics 365

10.1 Introduction 366
10.2 Variation 367
10.2.1 Variation within a population 367
10.2.2 Variation within subgroups: Simpson’s paradox 369
10.2.3 Variation in the results of random samples 372
10.3 Polls and Sampling 373
10.3.1 Sampling from the wrong population 373
10.3.2 Designing polls: Wording of questions 374
10.3.3 Designing polls: Selection of response alternatives 376
10.3.4 Designing polls: Arrangement of questions 377
10.3.5 Administering polls: Ensuring honest reporting 378
10.3.6 When can I trust a poll? 379
10.4 Endogenous Sampling Biases 380
 Contents xiii

10.5 Causal Inference and Extrapolation 382

10.5.1 Confounding variables 383
10.5.2 Spurious correlation and data mining 384
10.5.3 Linear extrapolation of nonlinear data 385
10.E Exercises 387

11. Data Graphics 393

11.1 Data 394
11.1.1 Types of variables 395
11.1.2 Types of data sets 397
11.1.3 Sources of economic and business data 398
11.2 Graphics for Univariate Data 399
11.2.1 Graphics that display every observation 399
11.2.2 Graphics for absolute and relative frequencies 402
11.2.3 Graphics for cumulative frequencies 408
11.3 Graphics for Multivariate Data 410
11.3.1 Graphics for frequencies 410
11.3.2 Graphics that display every observation 411
11.4 Principles for Data Graphics Design 418
11.4.1 First, do no harm 418
11.4.2 Infographics 419
11.4.3 One step beyond 421
11.A Appendix: Creating Data Graphics in Excel online
11.E Exercises 427

12. Descriptive Statistics 435

12.1 Descriptive Statistics for Univariate Data 436
12.1.1 Measures of relative standing: Percentiles and ranges 436
12.1.2 Measures of centrality: Mean and median 440
12.1.3 Measures of dispersion: Variance and standard deviation 441
xiv Contents

12.2 Descriptive Statistics for Bivariate Data 446

12.2.1 Measures of linear association: Covariance
and correlation 446
12.2.2 Visualizing correlations 448
12.2.3 Computing correlations: Arithmetic, pictures,
or computer 451
12.2.4 The road ahead: Regression analysis 456
12.E Exercises 457

13. Probability Models for Statistical Inference 464

13.1 Introduction 465
13.2 The I.I.D. Trials Model for Statistical Inference 467
13.3 Inference about Inherently Random Processes 468
13.3.1 Bernoulli trials 469
13.3.2 Trials with an unknown distribution 470
13.4 Random Sampling and Inference about Populations 470
13.4.1 Random sampling 470
13.4.2 The trials’ traits equal the data set’s descriptive statistics 472
13.4.3 Bernoulli trials 474
13.4.4 Trials with an unknown distribution 475
13.5 Random Sampling in Practice 476
13.E Exercises 482

14. Point Estimation 487

14.1 Parameters, Estimators, and Estimates 488
14.2 Desirable Properties of Point Estimators 490
14.3 The Sample Mean 492
14.3.1 Unbiasedness and consistency 493
14.3.2 Efficiency 495
14.3.3 The distribution of the sample mean 498
14.4 The Sample Variance 499
14.4.1 Defining the sample variance 500
14.4.2 Unbiasedness and consistency of the sample variance 502
14.5 Classical Statistics and Bayesian Statistics* 505
 Contents xv

14.A Appendix: A Short Introduction to Bayesian Statistics 507

14.B Appendix: Derivations of Properties of the Sample Variance 515
14.E Exercises 517

15. Interval Estimation and Confidence Intervals 527

15.1 What Is Interval Estimation? 528
15.2 Constructing Interval Estimators 529
15.2.1 The 95% interval estimator for 𝜇 when 𝜎2 is known 530
15.2.2 The 95% interval estimator for 𝜇 when 𝜎2 is unknown 534
15.2.3 The (1 − 𝛼) interval estimator for 𝜇 when 𝜎2 is unknown 535
15.2.4 Looking ahead: Standard errors and t distributions 538
15.3 Interval Estimators for Bernoulli Trials 539
15.4 Interpreting Confidence 541
15.5 Choosing Sample Sizes 548
15.5.1 Sample sizes for general i.i.d. trials 548
15.5.2 Sample sizes for Bernoulli trials processes 550
15.6 A Better Interval Estimator for Bernoulli Trials* 552
15.E Exercises 557

16. Hypothesis Testing 567

16.1 What Is Hypothesis Testing? 568
16.2 Hypothesis Testing: Basic Concepts 569
16.2.1 The probability model 570
16.2.2 Null and alternative hypotheses 571
16.2.3 One-tailed and two-tailed tests 573
16.2.4 Hypothesis tests and their significance levels 574
16.3 Designing Hypothesis Tests 575
16.3.1 Hypothesis tests for 𝜇 when 𝜎2 is known 575
16.3.2 Hypothesis tests for 𝜇 when 𝜎2 is unknown 581
16.3.3 Hypothesis tests for Bernoulli trials 582
16.4 Two-Tailed Hypothesis Tests 585
16.4.1 Two-tailed tests vs. one-tailed tests 587
16.4.2 Comparing two-tailed hypothesis tests and confidence
intervals 588
xvi Contents

16.5 Alternate Ways of Expressing Hypothesis Tests 591

16.5.1 z-statistics 591
16.5.2 P-values 593
16.6 Interpreting Hypothesis Tests 597
16.6.1 The meaning of significance 597
16.6.2 “Do not reject” vs. “accept” 598
16.6.3 Statistical significance versus practical significance 599
16.6.4 P-value .049 vs. P-value .051 602
16.6.5 Hypothesis testing in a vacuum 602
16.7 Significance and Power 604
16.7.1 Type I and Type II errors 605
16.7.2 Evaluating error probabilities 606
16.7.3 The power curve 612
16.7.4 Underpowered studies 616
16.8 Choosing Sample Sizes 619
16.8.1 Sample sizes for general i.i.d. trials 619
16.8.2 Sample sizes for Bernoulli trials processes 621
16.9 Summary and Preview 623
16.E Exercises 625

17. Inference from Small Samples 641

17.1 The t-Statistic 642
17.2 t Distributions 644
17.3 Small-Sample Inference about the Mean
of Normal Trials 648
17.3.1 The t-statistic and the t distribution 648
17.3.2 Interval estimation 648
17.3.3 Hypothesis testing 650
17.4 Sort-of-Normal Trials: The Robustness of the t-Statistic 652
17.5 Evaluating Normality of Trials* 657
17.A Appendix: Descendants of the Standard Normal
Distribution online
17.E Exercises 663
 Contents xvii

18. Inference about Differences in Means 671

18.1 Inference from Two Separate Samples 672
18.1.1 The basic two-sample model 672
18.1.2 Bernoulli trials 676
18.1.3 Small samples, normal trials, equal variances* 679
18.2 Inference from Paired Samples 683
18.2.1 Constructing paired samples 683
18.2.2 The basic paired-sample model 684
18.2.3 Small samples, normal trials* 686
18.3 Choosing between Separate and Paired Samples 687
18.3.1 A general rule 687
18.3.2 Paired sampling using two observations
per individual 689
18.3.3 Pairing samples using observable characteristics* 691
18.4 Causal Inference: Treatment Effects* 697
18.4.1 Randomized controlled experiments
and observational studies 697
18.4.2 Interventions and causal assumptions 699
18.4.3 Potential outcomes and average treatment effects 700
18.4.4 A probability model of an observational study 701
18.4.5 Selection bias in observational studies 702
18.4.6 Random assignment eliminates selection bias 704
18.4.7 Controlling for observable confounding variables 705
18.A Appendix: Decomposition of Variance in the Separate
Sample Model 706
18.B Appendix: The Distribution of the Pooled Sample Variance online
18.E Exercises 708

19. Simple Regression: Descriptive Statistics 722

19.1 The Regression Line 724
19.1.1 A brief review of descriptive statistics 725
19.1.2 The regression line 726
19.1.3 Examples, computations, and simulations 726
xviii Contents

19.2 Prediction and Residuals 731

19.2.1 Predictors, predictions, and residuals 731
19.2.2 Best-in-class predictors 734
19.2.3 Further characterizations of the regression line 737
19.2.4 Deriving the best constant and best linear predictors* 739
19.3 The Conditional Mean Function 740
19.3.1 Best unrestricted prediction 740
19.3.2 Best linear prediction of conditional means 746
19.4 Analysis of Residuals 747
19.4.1 Sums of squares and variances of residuals
for best-in-class predictors 747
19.4.2 Relative quality for best-in-class predictors 749
19.4.3 Decomposition of variance for regression 753
19.4.4 Sums of squares revisited 754
19.5 Pitfalls in Interpreting Regressions 755
19.5.1 Nonlinear relationships 755
19.5.2 Regression to the mean 756
19.5.3 Correlation and causation 761
19.6 Three Lines of Best Fit* 765
19.6.1 The reverse regression line 765
19.6.2 The neutral line 767
19.6.3 The three lines compared 771
19.A Appendix 774
19.A.1 Equivalence of the characterizations
of the regression line 774
19.A.2 Best linear prediction of conditional means 775
19.A.3 Relative quality for best-in-class predictors:
Derivation 776
19.A.4 Decomposition of variance for regression:
Derivation 777
19.B Appendix: Characterization of the Neutral Line online
19.E Exercises 778

Index 795
 Contents xix

20. Simple Regression: Statistical Inference† 1

20.1 The Classical and Random Sampling Regression Models 2
20.1.1 Fixed x sampling vs. random sampling 3
20.1.2 Linearity of conditional means 4
20.1.3 Constant conditional variances 5
20.1.4 How reasonable are the assumptions? 6
20.2 The OLS Estimators 9
20.2.1 Defining the OLS estimators 10
20.2.2 Basic properties of the OLS estimators 13
20.2.3 Estimating conditional means 14
20.2.4 Approximate normality of the OLS estimators 15
20.2.5 Efficiency of the OLS estimators: The Gauss-Markov
theorem* 16
20.3 The Sample Conditional Variance 17
20.4 Interval Estimators and Hypothesis Tests 19
20.4.1 Review: Inference about an unknown mean 19
20.4.2 Interval estimators and hypothesis tests for 𝛽 21
20.4.3 Interval estimators and hypothesis tests for conditional
means 24
20.4.4 Population regressions vs. sample regressions 26
20.5 Small Samples and the Classical Normal
Regression Model 28
20.5.1 The classical normal regression model 29
20.5.2 Interval estimators and hypothesis tests for 𝛽 31
20.5.3 Interval estimators and hypothesis tests for conditional
means 35
20.5.4 Prediction intervals* 36
20.6 Analysis of Residuals, R2 , and F Tests 39
20.6.1 Sums of squares and R2 39
20.6.2 The F test for 𝛽 = 0 41
20.6.3 What happens without normality? The robustness
of the F-statistic* 43

† Chapter 20 and the online Appendices are located on the text’s companion ARC site.
xx Contents

20.7 Regression and Causation 45

20.7.1 An alternate description of the classical regression model 45
20.7.2 Causal regression models 46
20.7.3 Multiple regression 47
20.A Appendix 48
20.A.1 Analysis of the random sampling regression model 48
20.A.2 The unstructured regression model 50
20.A.3 Computation of the mean and variance of B 51
20.A.4 Proof of the Gauss-Markov theorem 52
20.A.5 Proof that the sample conditional variance is unbiased 54
20.A.6 Deriving the distribution of the F-statistic 56
20.E Exercises 60

Chapter Appendices available online

4.B Appendix: The Capital Asset Pricing Model
4.B.1 Portfolio selection with many risky assets
4.B.2 Riskless lending and borrowing
4.B.3 The market portfolio
4.B.4 Risk and expected returns
Exercises
6.A Appendix: Continuous Distributions
6.A.1 Cumulative distribution functions
6.A.2 Density functions
6.A.3 Expected values
6.A.4 Transformations of density functions
6.B Appendix: Continuous Joint Distributions
6.B.1 Joint distribution functions
6.B.2 Joint density functions
6.B.3 Marginal density functions
6.B.4 Expected values
6.B.5 Conditional density, mean, and variance functions
6.B.6 Transformations of joint density functions
 Contents xxi

6.B.7 Independent random variables

6.B.8 Sums of independent random variables
Exercises
7.A Appendix: Proof of the Central Limit Theorem
7.A.1 Moment generating functions
7.A.2 Proof of the central limit theorem
Exercises
11.A Appendix: Creating Data Graphics in Excel
17.A Appendix: The Descendants of the Standard Normal
Distribution
17.A.1 𝜒 2 distributions
17.A.2 The sample variance of normal trials
17.A.3 t distributions
17.A.4 Why does the t-statistic have a t distribution?
17.A.5 F distributions
17.A.6 The density functions
Exercises
18.A Appendix: The distribution of the pooled sample variance
19.B Appendix: Characterization of the neutral line
Lists of Excel Workbooks

Simulation workbooks

Name Chapter Simulation of

birthdays_100.xlsx 5 Shared birthdays in 100 groups of 100 people
birthdays_23.xlsx 5 Shared birthdays in 1000 groups of 23 people
spinner.xlsx 6 Distribution of a uniform random variable
best_of_two.xlsx 6 Distribution of the maximum of two independent
uniform random variables
uniform_sum.xlsx 6 Distribution of the sum of two independent
uniform random variables
normal_sum.xlsx 6 Distribution of the sum of two independent normal
random variables
Brownian_motion.xlsx 6 Sample paths of Brownian motion
geometric_Brownian_ 6 Sample paths of geometric Brownian motion
motion.xlsx
CLT_uniform.xlsx 7 Distributions of sums of i.i.d. uniform random
variables, with normal approximations
CLT_exponential.xlsx 7 Distributions of sums of i.i.d. exponential random
variables, with normal approximations
CLT_Bernoulli.xlsx 7 Distributions of sums of i.i.d. Bernoulli random
variables, with normal approximations
CLT_discrete.xlsx 7 Distributions of sums of i.i.d. discrete random
variables, with normal approximations
bombs.xlsx 8 Bombing problems, with Poisson approximations
keys.xlsx 8 Shuffled keys problems, with Poisson
approximations
memorylessness.xlsx 8 Conditional distributions of exponential random
variables
ATMs.xlsx 8 Distributions of minima of exponential random
variables
website.xlsx 8 Exponential interarrival model
streaks.xlsx 9 Distributions of streak lengths in Bernoulli trials
processes

xxiii
xxiv Lists of Excel Workbooks

Name Chapter Simulation of

martingale.xlsx 9 Sample paths of betting the martingale
correlations.xlsx 12 Bivariate data with a given correlation coefficient
paintball.xlsx 15 Confidence intervals for means, with and without
knowledge of the mean
20_CIs.xlsx 15 20 confidence intervals, graphed with the mean of
the trials
t_statistic_uniform.xlsx 17 Distributions of the t-statistic of uniform random
variables, with approximation by t distribution
t_statistic_exponential 17 Distributions of the t-statistic of exponential
.xlsx random variables, with approximation by
t distribution
normal_QQ_plots.xlsx 17 Random samples from various distributions, with
normal Q-Q plots
regression_generator 19 Bivariate data, with regression line
.xlsx

Calculation workbooks

Name Chapter Description

traits.xlsx 3, 4 Calculates means, variances, covariances, etc. of
discrete random variables
two_assets.xlsx 4 Analyzes and illustrates two-asset portfolios
distributions.xlsx 5, 6, 8, Calculates probabilities and percentiles for
14, 17 common distributions
BTP_interval_estimators 15 Compares coverage probabilities of standard and
.xlsx adjusted interval estimators for Bernoulli trials
processes
HT_errors.xlsx 16 Computes and illustrates probabilities of Type I
and Type II errors
HT_errors_BTP.xlsx 16 Computes and illustrates probabilities of Type I
and Type II errors for Bernoulli trials processes
power_curves.xlsx 16 Computes and illustrates power curves
regression_descriptive 19 Performs descriptive regression analysis
.xlsx
regression_inference 20 Performs inferential regression analysis
.xlsx
Another random document with
no related content on Scribd:
 This eBook is for the use of anyone anywhere in the United
States and most other parts of the world at no cost and with
almost no restrictions whatsoever. You may copy it, give it away
or re-use it under the terms of the Project Gutenberg License
included with this eBook or online at www.gutenberg.org. If you
are not located in the United States, you will have to check the
laws of the country where you are located before using this
eBook.

1.E.2. If an individual Project Gutenberg™ electronic work is derived

from texts not protected by U.S. copyright law (does not contain a
notice indicating that it is posted with permission of the copyright
holder), the work can be copied and distributed to anyone in the
United States without paying any fees or charges. If you are
redistributing or providing access to a work with the phrase “Project
Gutenberg” associated with or appearing on the work, you must
comply either with the requirements of paragraphs 1.E.1 through
1.E.7 or obtain permission for the use of the work and the Project
Gutenberg™ trademark as set forth in paragraphs 1.E.8 or 1.E.9.

1.E.3. If an individual Project Gutenberg™ electronic work is posted

with the permission of the copyright holder, your use and distribution
must comply with both paragraphs 1.E.1 through 1.E.7 and any
additional terms imposed by the copyright holder. Additional terms
will be linked to the Project Gutenberg™ License for all works posted
with the permission of the copyright holder found at the beginning of
this work.

1.E.4. Do not unlink or detach or remove the full Project

Gutenberg™ License terms from this work, or any files containing a
part of this work or any other work associated with Project
Gutenberg™.

1.E.5. Do not copy, display, perform, distribute or redistribute this

electronic work, or any part of this electronic work, without
prominently displaying the sentence set forth in paragraph 1.E.1 with
active links or immediate access to the full terms of the Project
Gutenberg™ License.
1.E.6. You may convert to and distribute this work in any binary,
compressed, marked up, nonproprietary or proprietary form,
including any word processing or hypertext form. However, if you
provide access to or distribute copies of a Project Gutenberg™ work
in a format other than “Plain Vanilla ASCII” or other format used in
the official version posted on the official Project Gutenberg™ website
(www.gutenberg.org), you must, at no additional cost, fee or expense
to the user, provide a copy, a means of exporting a copy, or a means
of obtaining a copy upon request, of the work in its original “Plain
Vanilla ASCII” or other form. Any alternate format must include the
full Project Gutenberg™ License as specified in paragraph 1.E.1.

1.E.7. Do not charge a fee for access to, viewing, displaying,

performing, copying or distributing any Project Gutenberg™ works
unless you comply with paragraph 1.E.8 or 1.E.9.

1.E.8. You may charge a reasonable fee for copies of or providing

access to or distributing Project Gutenberg™ electronic works
provided that:

• You pay a royalty fee of 20% of the gross profits you derive from
the use of Project Gutenberg™ works calculated using the
method you already use to calculate your applicable taxes. The
fee is owed to the owner of the Project Gutenberg™ trademark,
but he has agreed to donate royalties under this paragraph to
the Project Gutenberg Literary Archive Foundation. Royalty
payments must be paid within 60 days following each date on
which you prepare (or are legally required to prepare) your
periodic tax returns. Royalty payments should be clearly marked
as such and sent to the Project Gutenberg Literary Archive
Foundation at the address specified in Section 4, “Information
about donations to the Project Gutenberg Literary Archive
Foundation.”

• You provide a full refund of any money paid by a user who

notifies you in writing (or by e-mail) within 30 days of receipt that
s/he does not agree to the terms of the full Project Gutenberg™
 License. You must require such a user to return or destroy all
copies of the works possessed in a physical medium and
discontinue all use of and all access to other copies of Project
Gutenberg™ works.

• You provide, in accordance with paragraph 1.F.3, a full refund of

any money paid for a work or a replacement copy, if a defect in
the electronic work is discovered and reported to you within 90
days of receipt of the work.

• You comply with all other terms of this agreement for free
distribution of Project Gutenberg™ works.

1.E.9. If you wish to charge a fee or distribute a Project Gutenberg™

electronic work or group of works on different terms than are set
forth in this agreement, you must obtain permission in writing from
the Project Gutenberg Literary Archive Foundation, the manager of
the Project Gutenberg™ trademark. Contact the Foundation as set
forth in Section 3 below.

1.F.

1.F.1. Project Gutenberg volunteers and employees expend

considerable effort to identify, do copyright research on, transcribe
and proofread works not protected by U.S. copyright law in creating
the Project Gutenberg™ collection. Despite these efforts, Project
Gutenberg™ electronic works, and the medium on which they may
be stored, may contain “Defects,” such as, but not limited to,
incomplete, inaccurate or corrupt data, transcription errors, a
copyright or other intellectual property infringement, a defective or
damaged disk or other medium, a computer virus, or computer
codes that damage or cannot be read by your equipment.

1.F.2. LIMITED WARRANTY, DISCLAIMER OF DAMAGES - Except

for the “Right of Replacement or Refund” described in paragraph
1.F.3, the Project Gutenberg Literary Archive Foundation, the owner
of the Project Gutenberg™ trademark, and any other party
distributing a Project Gutenberg™ electronic work under this
agreement, disclaim all liability to you for damages, costs and
expenses, including legal fees. YOU AGREE THAT YOU HAVE NO
REMEDIES FOR NEGLIGENCE, STRICT LIABILITY, BREACH OF
WARRANTY OR BREACH OF CONTRACT EXCEPT THOSE
PROVIDED IN PARAGRAPH 1.F.3. YOU AGREE THAT THE
FOUNDATION, THE TRADEMARK OWNER, AND ANY
DISTRIBUTOR UNDER THIS AGREEMENT WILL NOT BE LIABLE
TO YOU FOR ACTUAL, DIRECT, INDIRECT, CONSEQUENTIAL,
PUNITIVE OR INCIDENTAL DAMAGES EVEN IF YOU GIVE
NOTICE OF THE POSSIBILITY OF SUCH DAMAGE.

1.F.3. LIMITED RIGHT OF REPLACEMENT OR REFUND - If you

discover a defect in this electronic work within 90 days of receiving it,
you can receive a refund of the money (if any) you paid for it by
sending a written explanation to the person you received the work
from. If you received the work on a physical medium, you must
return the medium with your written explanation. The person or entity
that provided you with the defective work may elect to provide a
replacement copy in lieu of a refund. If you received the work
electronically, the person or entity providing it to you may choose to
give you a second opportunity to receive the work electronically in
lieu of a refund. If the second copy is also defective, you may
demand a refund in writing without further opportunities to fix the
problem.

1.F.4. Except for the limited right of replacement or refund set forth in
paragraph 1.F.3, this work is provided to you ‘AS-IS’, WITH NO
OTHER WARRANTIES OF ANY KIND, EXPRESS OR IMPLIED,
INCLUDING BUT NOT LIMITED TO WARRANTIES OF
MERCHANTABILITY OR FITNESS FOR ANY PURPOSE.

1.F.5. Some states do not allow disclaimers of certain implied

warranties or the exclusion or limitation of certain types of damages.
If any disclaimer or limitation set forth in this agreement violates the
law of the state applicable to this agreement, the agreement shall be
interpreted to make the maximum disclaimer or limitation permitted
by the applicable state law. The invalidity or unenforceability of any
provision of this agreement shall not void the remaining provisions.

1.F.6. INDEMNITY - You agree to indemnify and hold the

Foundation, the trademark owner, any agent or employee of the
Foundation, anyone providing copies of Project Gutenberg™
electronic works in accordance with this agreement, and any
volunteers associated with the production, promotion and distribution
of Project Gutenberg™ electronic works, harmless from all liability,
costs and expenses, including legal fees, that arise directly or
indirectly from any of the following which you do or cause to occur:
(a) distribution of this or any Project Gutenberg™ work, (b)
alteration, modification, or additions or deletions to any Project
Gutenberg™ work, and (c) any Defect you cause.

Section 2. Information about the Mission of

Project Gutenberg™
Project Gutenberg™ is synonymous with the free distribution of
electronic works in formats readable by the widest variety of
computers including obsolete, old, middle-aged and new computers.
It exists because of the efforts of hundreds of volunteers and
donations from people in all walks of life.

Volunteers and financial support to provide volunteers with the

assistance they need are critical to reaching Project Gutenberg™’s
goals and ensuring that the Project Gutenberg™ collection will
remain freely available for generations to come. In 2001, the Project
Gutenberg Literary Archive Foundation was created to provide a
secure and permanent future for Project Gutenberg™ and future
generations. To learn more about the Project Gutenberg Literary
Archive Foundation and how your efforts and donations can help,
see Sections 3 and 4 and the Foundation information page at
www.gutenberg.org.
 Section 3. Information about the Project
Gutenberg Literary Archive Foundation
The Project Gutenberg Literary Archive Foundation is a non-profit
501(c)(3) educational corporation organized under the laws of the
state of Mississippi and granted tax exempt status by the Internal
Revenue Service. The Foundation’s EIN or federal tax identification
number is 64-6221541. Contributions to the Project Gutenberg
Literary Archive Foundation are tax deductible to the full extent
permitted by U.S. federal laws and your state’s laws.

The Foundation’s business office is located at 809 North 1500 West,

Salt Lake City, UT 84116, (801) 596-1887. Email contact links and up
to date contact information can be found at the Foundation’s website
and official page at www.gutenberg.org/contact

Section 4. Information about Donations to

the Project Gutenberg Literary Archive
Foundation
Project Gutenberg™ depends upon and cannot survive without
widespread public support and donations to carry out its mission of
increasing the number of public domain and licensed works that can
be freely distributed in machine-readable form accessible by the
widest array of equipment including outdated equipment. Many small
donations ($1 to $5,000) are particularly important to maintaining tax
exempt status with the IRS.

The Foundation is committed to complying with the laws regulating

charities and charitable donations in all 50 states of the United
States. Compliance requirements are not uniform and it takes a
considerable effort, much paperwork and many fees to meet and
keep up with these requirements. We do not solicit donations in
locations where we have not received written confirmation of
compliance. To SEND DONATIONS or determine the status of
compliance for any particular state visit www.gutenberg.org/donate.

While we cannot and do not solicit contributions from states where

we have not met the solicitation requirements, we know of no
prohibition against accepting unsolicited donations from donors in
such states who approach us with offers to donate.

International donations are gratefully accepted, but we cannot make

any statements concerning tax treatment of donations received from
outside the United States. U.S. laws alone swamp our small staff.

Please check the Project Gutenberg web pages for current donation
methods and addresses. Donations are accepted in a number of
other ways including checks, online payments and credit card
donations. To donate, please visit: www.gutenberg.org/donate.

Section 5. General Information About Project

Gutenberg™ electronic works
Professor Michael S. Hart was the originator of the Project
Gutenberg™ concept of a library of electronic works that could be
freely shared with anyone. For forty years, he produced and
distributed Project Gutenberg™ eBooks with only a loose network of
volunteer support.

Project Gutenberg™ eBooks are often created from several printed

editions, all of which are confirmed as not protected by copyright in
the U.S. unless a copyright notice is included. Thus, we do not
necessarily keep eBooks in compliance with any particular paper
edition.

Most people start at our website which has the main PG search
facility: www.gutenberg.org.

This website includes information about Project Gutenberg™,

including how to make donations to the Project Gutenberg Literary
Archive Foundation, how to help produce our new eBooks, and how
to subscribe to our email newsletter to hear about new eBooks.