# Lecture 3: Probability Theory

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Assigning probabilities to Events
 Random

experiment

– a random experiment is a process or course of

action, whose outcome is uncertain. – Performing the same random experiment repeatedly, may result in different outcomes, therefore, the best we can do is talk about the probability of occurrence of a certain outcome. – To determine the probabilities we need to define the possible outcomes first.

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– Determining the outcomes. Our objective is to Our objective is to  Build an exhaustive list of all possible determine P(A), the determine P(A), the outcomes. probability that probability that  Make sure the listed outcomes are event A will occur. event A will occur. mutually exclusive. – A list of outcomes that meet the two

conditions above, is called a sample space.
Sample Space

a sample space of a random experim is a list of all possible outcomes of th experiment. The outcomes must be mutually exclusive and exhaustive.

Simple events

Event

An event is any collection The individual outcomes are called simple events. or more simple event of one Simple events cannot be further decomposed 3 nto constituent outcomes.

Assigning probabilities
– Given a sample space S={E1,E2,…,En}, the

following characteristics for the probability P(Ei) of the simple event Ei must hold: 1. 0≤ P( Ei ) ≤ 1 for eachi
2.

i=1

n

P( Ei ) = 1

– Probability of an event: The probability P(A)

of event A is the sum of the probabilities assigned to the simple events contained in A.

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Probability Trees - continued
This is a useful device to build a sample space and to calculate probabilities of simple events and events.

Consider the random experiment of flipping a coin
Stage 1 Stage 2 H Second flip T H First flip T Second flip T H HH
P(HH)=0.25 P(HT)=0.25 P(TH)=0.25 P(TT)=0.25

Origin

HT TH TT

Simple events

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Probability Trees - continued
– This is a useful device to build a sample space

and to calculate probabilities of simple events and events.
HH
P(HH)=0.25 P(HT)=0.25 P(TH)=0.25 P(TT)=0.25

alculate the probability of event A HT here A={at least one outcome of Heads} = The sample space = TH P(A)=.25+.25+.25=.75 TT

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Probability of Combinations of Events
– If A and B are two events, then

P(A or B) = P(A occur or B occur or both) P(A and B) = P(A and B both occur) P(A)= P(A does occur not ) P(A|B) = P(A occurs given that B has occurred)
The union of A and B The intersection of A and B The complement event of A The conditional probability of A given B
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 Example

6.1

– The number of spots turning up when a six-side

die is tossed is observed. Consider the following events.
A: The number observed is at most 2.  B: The number observed is an even number.  C: The number 4 turns up.

– Answer the following questions:

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(a) Define the sample space for this random experiment and assign probabilities to the simple events. Solution S = {1, 2, 3, 4, 5, 6} Each simple event is equally likely to occur, thus, P(1)=P(2)=…=P(6)=1/6. A Venn Diagram 2 1 4 5
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3 6

(b) Find P(A) 2 3 6 4 5

1

A

P(A) = P{1, 2} P(A) = P(1) + P(2) = 1/6 +1/6 = 2/6

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Find A) ( A
6 4 5

1

A

2

3

The complement of event A = { 3 4,5 6 , , } A is 4

P(A) = P(3) + P(4) + P(5) + P(6) =

6
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Are events A and C mutually exclusive? There is no overlap between the two regions A2 A 3 6 4 Event C 5 Events A and C are mutually exclusive because they cannot occur simultaneously
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1

Find P(A or C)

A 1 A or C A or C 4 6

2

3 5

Event C P(A or C) = P(1, 2, 4) = 1/6 + 1/6 + 1/6 = 3/6 or, because A and C are mutually exclusive, P(A or C) = P(A) + P(C) = 2/6 + 1/6 = 3/6.
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Find P(A and B)

A and B 3 2 4 B 6 5

1 A

P(A and B) = P(2) = 1/6

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Find P(A or B)

A or B 3 2 4 B 6 5

1 A

P(A or B) = P(1) + P(2) +P(4) + P(6) = 4/6

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Find P(C|B)

1 Event C

2 4

B 6

3 5

P(The number is 4 | The number is even) = 1/3

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Conditional Probability
– The probability of an event when partial

knowledge about the outcome of an experiment is known, is called Conditional probability. – We use the notation P(A|B) = The conditional probability that event A occurs, given that event B has occurred.

he partial knowledge s contained in the P(A |B) = condition”

P(A and ) B P(B)
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Independent and Dependent Events
– Two events A and B are said to be

independent if P(A|B) = P(A) or P(B|A) = P(B). Otherwise, the events are dependent.
– Note that, if the occurrence of one event does

not change the likelihood of occurrence of the other event, the two events are independent

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 Example

6.2

– The personnel department of an insurance

company has compiled data regarding promotion, classified by gender. Is promotion and gender dependent on one another?
M anager Prom otedNotProm oted M ale 46 184 Fem ale 8 32 total 54 216 Total 230 40 270

Events of interest: M: A manager is a male M: A manager is a female

A: A manager is promoted
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A: A manager is not promo

– Let us check if P(A|M)=P(A). If this equality

holds, there is no difference in probability of promotion between a male and a female manager.

(A) = Number of promotions / total number of managers = 54 /270 = .20

A|M) = Number of promotions | Only male managers are obs = 46 / 230 = .20. Conclusion: there is no discrimination Conclusion: there is no discrimination in awarding promotions. in awarding promotions.
M anager Prom otedNotProm oted M ale 46 184 Fem ale 8 32 Total 54 216

46

Total 230 40 270

230 270
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54

Note that independent events and mutually exclusive events are not the same!! A and B are two mutually exclusive events, and A can take place, that is P(A)>0. Can A and B be independent?

A

B

Then, the conditional probability that A occurs given that B hasevent B has occurred. is P(A|B) = 0, Let’s assume occurred is zero, that because P(A and B) = 0. However, P(A)>0, thus, A and B cannot be independent
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