Bayes Theorem

Bayes Theorem describes the probability of an event, based on prior knowledge of

conditions that might be related to the event.

LIKELIHOOD, the
probability of “B” being PRIOR, the probability of
TRUE given that “A” is “A” being TRUE. This is
TRUE knowledge
P(B|A) x P(A)
P(A|B) =
P(B)

POSTERIOR, the MARGINAL, the

probability of “A” being probability of “B” being
TRUE given that “B” is TRUE
TRUE

When we get new information, we should update our probabilities to take the new
information into account. Bayesian method tell us exactly how to do this.
Problem Statement:
Sarabjeet wants to roster John Smith on Monday for a critical process. He is not
sure, if John would show up on Monday. Sarabjeet need some kind of assurance to
reduce the chances of unplanned shrinkage.
This looks like a Bayes Problem. So we modified our problem statement as follow. It
simply says “What is the probability of John showing up, if it is Monday”.

P(M|P) x P(P)
P(P|M) =
P(M)

A convenient tool for doing Bayesian is a Bayes table. You can write Bayes
table on paper or a spreadsheet.
 4 Easy Steps For Solving Bayes Problem
Step 1: Determine PRIOR Step 2: Determine LIKELIHOOD
Based on John’s attendance data we get 207/300 as present ratio We also know that when we call John on Mondays, he only
and 93/300 as absent ratio. This becomes 69% and 31% showed up on 68% of instances. 32% of instances he was not
respectively. absent.
P(P) = 207/300 P(M|P) = (207/300) x (91/207)

Event Prior Event Prior Likelihood*

P .69 P .69 .44
A .31 A .31 .56
Totals 1 Totals 1 1

Step 3: Calculate MARGINAL Step 4: Calculate POSTERIOR

Multiply Priors by Likelihoods and sum up to Normalize the Compute Posterior probability dividing un-norm probability by sum
probability. or sum prod of un-norm probability
(207/300) x (91/207)
P(M) = (207/300) x (91/207) + (93/207)x(52/93) P(P|M) =
(207/300) x (91/207) + (93/207)x(52/93)
Event Prior Likelihood* Un-norm Probability Event Prior Likelihood* Un-norm Probability Posterior
P .69 .44 .69 x .44 = .30 P .69 .44 .30 .30/.47= .64
A .31 .56 .31 x .56 = .17 A .31 .56 .17 .17/47 = .36
Totals 1 1 .47 Totals 1 1 .47 1.00

* Please note, Likelihood add up to 1 only when events are Dichotomous. Probability conditioned on different hypothesis don’t add up to 1.
Interpretation of Results
• We now know that if we have to roster John Smith on Monday, there is
only 64% chance that he would show up.
• Repeat this step for all the agents in your roster.
• Agents with low probability can be replaced with agents with higher
probability.
• Perform this activities for the period of 3-6 months to understand the
agent pattern.
• Add more parameter like holidays, shifts and process to get better insight.