Probability

Distributions
 Probability
1 Certain

Probability is the
likelihood
that the event will .5
occur.
Two Conditions:
Value is between 0
and 1. 0 Impossible

Sum of the
Probability: Three Ways
First: Process Generating Events is
Known: Compute using
classical probability definition
Example: rolling dice
Second: Relative Frequency:
Compute using empirical data
Example: Rain Next day based on
history
Third: Subjective Method:
Compute based on judgment
Example: Analyst predicts DIJA will
 Random Variable

A numerical description of the

outcome of an experiment
Example:Discrete RV: countable # of
outcomes
Throw a die twice: Count the number
of times 4 comes up (0, 1, or 2 times)
 Discrete Random
Variable
Discrete Random Variable:

Obtained by Counting (0, 1, 2,

3, etc.)
Usually finite by number of
different values
e.g.
Toss a coin 5 times. Count the
number of tails. (0, 1, 2, 3,
4, or 5 times)
 Random Variable

A numerical description of the

outcome of an experiment

Example: Continuous RV:

The Value of the DJIA
Time to repair a failed
machine
RV Given by Capital Letters X & Y
Specific Values Given by lower
case
 Probability Distribution

Characterization of the
possible values that a RV
may assume along with the
probability of assuming
these values.
 Discrete Probability
Distribution
List of all possible [ xi, p(xi) ] pairs
Xi = value of random variable
P(xi) = probability associated with
value
Mutually exclusive (nothing in
common)
Collectively exhaustive (nothing left
out)
0 ≤ p(xi) ≤ 1
Σ P(xi) = 1
Weekly Demand of a Slow-Moving
Product

Probability Mass
Function
Demand, x Probability, p(x)
0 0.1

1 0.2

2 0.4

3 0.3

4 or more 0
 Sample Spaces
Collection of all Possible
Outcomes
e.g. All 6 faces of a die:
e.g. All 52 cards of a bridge deck:
 Events
Simple Event: Outcome from a
Sample Space
with 1 Characteristic
e.g. A Red Card from a deck of cards.
Joint Event: Involves 2 Outcomes
Simultaneously
e.g. An Ace which is also a Red Card
from a
deck of cards.
 Visualizing Events
Contingency Tables
Tree Diagrams Ace Not Ace Total

Black 2 24
26
Red 2 24 26

Total 4 48 52
 Simple Events
The Event of a Happy Face

There are 5 happy faces in this collection

of 18 objects
 Joint Events
The Event of a Happy Face AND Light
Colored

3 Happy Faces which are light

 Special Events
Null Event
Null event
Club & diamond on
1 card draw
♣♣
Complement of
event
For event A, A '

All events not In

A:
 Dependent or
Independent
Events
The Event of a Happy Face GIVEN it is Light
Colored
E = Happy Face ⎜ Light
Color

3 Items: 3 Happy Faces Given they are

 Tree Diagram
Event Ace
Possibilities
Red
Card
s Not an
Full
Deck Ace
Ace
of
Cards Blac
k
Card
s Not an
Ace
 Computing
Probability
The Probability of an Event, E:
Each
P(E) of the Outcome in the
Number of Event Outcomes

=
Sample Space
Total Number of Possible Outcomes in the Sample Space

equally
X likely to occur.
= e.g.
T
P ( ) =
(There are 2 ways to get one 6 and
2/36
the other 4)
 Computing
Joint
Probability
The Probability of a Joint Event, A
and B:
P(A and B)
Number of Event Outcomes from both A and B
= Total Number of Possible Outcomes in Sample Space

e.g. P(Red Card and

Ace)
2 Red Aces 1
= =
52 Total Number of Cards 26
 Conditional
Probability and
Statistical
Conditional
Independence
Probability:
P ( A and B )
P(A⎜B) =
P( B )

Multiplication
Rule: P(A and B) = P(A ⎢B) •
P(B) = P(B ⎢Α) •
P(A)
 Conditional Probability
and Statistical
Independence (continued)
Events are
Independent:
P(A ⎢ B) =
Or, P(A)
P(B ⎢ A) =
P(B)
Or, P(A and B) = P(A)
• P(B)
Events A and B are Independent
when the probability of one event,
A is not affected by another event,
B.
 Discrete Probability
Distribution Example

Event: Toss 2 Coins. Count

# Tails.
Probability distribution
Values probability
T 0 1/4 = .25
1 2/4 = .50
T
2 1/4 = .25
T T
Discrete Random Variable
Summary Measures

Expected value (The mean)

Weighted average of the
probability distribution
μ = E(X) = ∑xi p(xi)
In slow-moving product demand example,
the expected value is :
E(X) = 0 × 0.1 + 1 ×.2 + 2 × .4 + 3 × .3
= 1.9
The average demand on the
long run is 1.9
 Important Discrete
Probability Distribution
Models

Discrete
Probability
Distributions

Binomi Poiss
al on
Binomial Distribution

‘N’ identical trials

Example: 15 tosses of a coin, 10
light bulbs taken from a warehouse
2 mutually exclusive outcomes on
each trial
Example: Heads or tails in each
toss of a coin, defective or not
defective light bulbs
Binomial Distributions
Constant Probability for each
Trial
Example: Probability of getting a
tail is the same each time we toss
the coin and each light bulb has
the same probability of being
defective
2 Sampling Methods:
Infinite Population Without
Replacement
Finite Population With
 Binomial Probability Distribution
Function

= n ! X − n −X
P(X p (1 p)
) X (n −X)!
!
P(X) = probability that X successes given a
knowledge of n and p
Tails in 2 Tosses of
X = number of ‘successes’ inCoin
sample, (X = 0, 1, 2, ..., n)
X P(X)
0 1/4
p = probability of each ‘success’
= .25
n = sample size 1 2/4
= .50
 Binomial Distribution
Characteristics

Mean P( n=5 p=
. X)
μ =E ( X ) =n 6
. 0.1
4
.
p
e.g. μ = 5 (.1) 2
0 X
0 1 2 3 4 5
= .5
Standard
Deviation n=5 p=
σ = np (1−p) P(
. X)
6
. 0.5
4
.
e.g. σ= 5(.5)(1 20 X
0 1 2 3 4 5
- .5) = 1.118
 Poisson Distribution
Poisson process:
Discrete events in an ‘interval’ P ( X = x |λ
The probability of one success in
- λ λx
an interval is stable
The probability of more than one e
success in this interval is 0
Probability of success is x!
Independent from interval
to
Interval
Examples:
# Customers arriving in 15 min
# Defects per case of light bulbs
 Poisson Distribution
Function
− X
eλ λ
P (X ) =
X!
P(X ) = probability of X successes
given λ
λ = expected (mean) number of
‘successes’
e = 2.71828 (base of natural logs)
e.g.
X =Find theof ‘successes’ per unit
number - 4
probability of 4 e
P(X) =3.6 3. = .191
6
4!
customers arriving in 2

3 minutes when the

 Poisson Distribution
Characteristics

Mean P( λ = 0.5
μ =E (X ) = λ . X)
6
.
N
=∑ X P ( X )
4
.
2
0 X
i i 0 1 2 3 4 5
i =1

P( λ =6
. X)
Standard 6
.
Deviation
σ = λ 4
.
2
0 X
0 2 4 6 8 1
0