Probability and probability

distributions
Dr. Kishore Morya
Probability in Marketing

Brand Connections is Brand Thinc’s proprietary research approach

The probability (likelihood) of an action (any action) being taken after a customer or
consumer has any brand/marketing exposure.
Allows you to understand, which brand attributes drive specific actions quantifiably!
Product Launch Success or Failure
 Product Launch Marketing is a Science, a ‘numbers game’ and
a discipline

Source: Winning at New Products, Source: Stevens, G.A. and Burley, J., “3,000 Raw Ideas = 1 Commercial Success!”,(May/June 1997)
Research Technology Management, Vol. 40, #3, pp. 9-27.
Introduction to Probability

 Experiments, Counting Rules, and Assigning Probability

 Events and their probabilities
 Basic Relationships of Probability
 Conditional Probability
 Bayes Theorem
 Probability : Measure of Chance of Favorable
Occurrence
Increasing Likelihood of Occurrence

0 .5 1
Probability:

The event The occurrence The event

is very of the event is is almost
unlikely just as likely as certain
to occur. it is unlikely. to occur.
An Experiment and its Sample Space

 An experiment is any process that generates well-defined outcomes

 The sample space for an experiment is the set of all experimental outcomes
 An experimental outcome is also called a sample point
Example: Bradley Investments
Bradley has invested in two stocks, Markley Oil and
Collins Mining. Bradley has determined that the
possible outcomes of these investments three months
from now are as follows.

Investment Gain or Loss

in 3 Months (in $000)
Markley Oil Collins Mining
10 8
5 -2
0
-20
A Counting Rule for
Multiple-Step Experiments

 If an experiment consists of a sequence of k steps

in which there are n1 possible results for the first step,
n2 possible results for the second step, and so on,
then the total number of experimental outcomes is
given by (n1)(n2) . . . (nk).
 A helpful graphical representation of a multiple-step
experiment is a tree diagram.
A Counting Rule for
Multiple-Step Experiments

Bradley Investments can be viewed as a

two-step experiment. It involves two stocks, each
with a set of experimental outcomes.

Markley Oil: n1 = 4
Collins Mining: n2 = 2
Total Number of
Experimental Outcomes: n1n2 = (4)(2) = 8
Tree Diagram

Markley Oil Collins Mining Experimental

(Stage 1) (Stage 2) Outcomes
Gain 8 (10, 8) Gain $18,000
(10, -2) Gain $8,000
Gain 10 Lose 2
Gain 8 (5, 8) Gain $13,000

Lose 2 (5, -2) Gain $3,000

Gain 5
Gain 8
(0, 8) Gain $8,000
Even
(0, -2) Lose $2,000
Lose 20 Lose 2
Gain 8 (-20, 8) Lose $12,000
Lose 2 (-20, -2) Lose $22,000
Counting Rule for Combinations
A second useful counting rule enables us to count the
number of experimental outcomes when n objects are to
be selected from a set of N objects.

Number of Combinations of N Objects Taken n at a Time

 N N!
CnN   
 n  n !( N  n )!

where: N! = N(N - 1)(N - 2) . . . (2)(1)

n! = n(n - 1)(n - 2) . . . (2)(1)
0! = 1
 Counting Rule for Permutations

A third useful counting rule enables us to count the

number of experimental outcomes when n objects are to
be selected from a set of N objects, where the order of
selection is important.
Number of Permutations of N Objects Taken n at a Time

 N N!
PnN  n !  
 n  (N  n )!

where: N! = N(N - 1)(N - 2) . . . (2)(1)

n! = n(n - 1)(n - 2) . . . (2)(1)
0! = 1
Assigning Probability

 Classical Method
 Relative Frequency Method
 Subjective Method
 Classical Method
If an experiment has n possible outcomes, this method
would assign a probability of 1/n to each outcome.

Example

Experiment: Rolling a die

Sample Space: S = {1, 2, 3, 4, 5, 6}
Probabilities: Each sample point has a
1/6 chance of occurring
Relative Frequency Method
 Example: Lucas Tool Rental
Lucas Tool Rental would like to assign
probabilities to the number of car polishers
it rents each day. Office records show the following
frequencies of daily rentals for the last 40 days.

Number of Number
Polishers Rented of Days
0 4
1 6
2 18
3 10
4 2
 Relative Frequency Method
Each probability assignment is given by
dividing the frequency (number of days) by
the total frequency (total number of days).

Number of Number
Polishers Rented of Days Probability
0 4 .10
1 6 .15
2 18 .45 4/40
3 10 .25
4 2 .05
40 1.00
 Subjective Method

 When economic conditions and a company’s

circumstances change rapidly it might be
inappropriate to assign probabilities based solely on
historical data.
 We can use any data available as well as our
experience and intuition, but ultimately a probability
value should express our degree of belief that the
experimental outcome will occur.
 The best probability estimates often are obtained by
combining the estimates from the classical or relative
frequency approach with the subjective estimate.
Subjective Method
Applying the subjective method, an analyst
made the following probability assignments.

Exper. Outcome Net Gain or Loss Probability

(10, 8) $18,000 Gain .20
(10, -2) $8,000 Gain .08
(5, 8) $13,000 Gain .16
(5, -2) $3,000 Gain .26
(0, 8) $8,000 Gain .10
(0, -2) $2,000 Loss .12
(-20, 8) $12,000 Loss .02
(-20, -2) $22,000 Loss .06
 Event and their Probabilities

An
An event
event is
is aa collection
collection of
of sample
sample points.
points.

The
The probability
probability of
of any
any event
event is
is equal
equal to
to the
the sum
sum of
of
the
the probabilities
probabilities of
of the
the sample
sample points
points in
in the
the event.
event.

IfIf we
we can
can identify
identify all
all the
the sample
sample points
points of of an
an
experiment
experiment andand assign
assign aa probability
probability to
to each,
each, we
we
can
can compute
compute the
the probability
probability ofof an
an event.
event.
Events and Their Probabilities
Event M = Markley Oil Profitable
M = {(10, 8), (10, -2), (5, 8), (5, -2)}
P(M) = P(10, 8) + P(10, -2) + P(5, 8) + P(5, -2)
= .20 + .08 + .16 + .26
= .70
 Events and Their Probabilities

Event C = Collins Mining Profitable

C = {(10, 8), (5, 8), (0, 8), (-20, 8)}
P(C) = P(10, 8) + P(5, 8) + P(0, 8) + P(-20, 8)
= .20 + .16 + .10 + .02
= .48
 Some Basic Probability Relationships
There are some basic probability relationships that
can be used to compute the probability of an event
without knowledge of all the sample point probabilities.

Complement
Complement of
of an
an Event
Event

Union
Union of
of Two
Two Events
Events

Intersection
Intersection of
of Two
Two Events
Events

Mutually
Mutually Exclusive
Exclusive Events
Events
 Compliment of an Event

The
The complement
complement of of event
event A
A is
is defined
defined toto be
be the
the event
event
consisting
consisting of
of all
all sample
sample points
points that
that are
are not
not in
in A.
A.
cc
The
The complement of A is denoted by A ..
complement of A is denoted by A

Sample
Event A Ac Space S

Venn
Diagram
 Union of Two Event

The
The union
union of
of events
events AA and
and BB is
is the
the event
event containing
containing
all
all sample
sample points
points that
that are
are in
in A
A or
or BB or
or both.
both.

The
The union
union of
of events
events A
A and
and BB is
is denoted
denoted by A B
by A B

Sample
Event A Event B Space S
 Intersection of Two Events

The
The intersection
intersection of
of events
events A A and
and BB is
is the
the set
set of
of all
all
sample
sample points
points that
that are
are in
in both
both A
A and
and B. B.

The
The intersection
intersection of
of events
events A
A and
and BB is
is denoted
denoted by
by A 
A 

Sample
Event A Event B Space S

Intersection of A and B
 Addition Law

The
The addition
addition law
law provides
provides aa way
way to
to compute
compute the
the
probability
probability of
of event
event A,
A, or
or B,
B, or
or both
both AA and
and BB occurring.
occurring.

The
The law
law is
is written
written as:
as:

P(A B) = P(A) + P(B) - P(A  B

 Mutually Exclusive Events

Two
Two events
events are
are said
said to
to be
be mutually
mutually exclusive
exclusive ifif the
the
events
events have
have no
no sample
sample points
points in
in common.
common.

Two
Two events
events are
are mutually
mutually exclusive
exclusive if,
if, when
when one
one event
event
occurs,
occurs, the
the other
other cannot
cannot occur.
occur.

Sample
Event A Event B Space S
 Mutually Exclusive Events

IfIf events
events A
A and
and BB are
are mutually
mutually exclusive, P(A 
exclusive, P(A  B
B == 0.
0.

The
The addition
addition law
law for
for mutually
mutually exclusive
exclusive events
events is:
is:
P(A B) = P(A) + P(B)

there’s no need to
include “- P(A  B”
 Conditional Probability

The
The probability
probability of
of an
an event
event given
given that
that another
another event
event
has
has occurred
occurred is
is called
called aa conditional
conditional probability.
probability.

The
The conditional
conditional probability
probability of
of A
A given
given BB is
is denoted
denoted
by
by P(A|B).
P(A|B).

A
A conditional
conditional probability
probability is
is computed
computed as
as follows
follows ::
P( A  B )
P( A|B) 
P( B)
 Conditional Probability

Event M = Markley Oil Profitable

Event C = Collins Mining Profitable
P(C | M ) = Collins Mining Profitable
given Markley Oil Profitable
We know: P(M C) = .36, P(M) = .70
P(C  M ) .36
Thus: P(C | M )    .5143
P( M ) .70
 Multiplication Law

The
The multiplication
multiplication lawlaw provides
provides aa way
way to
to compute
compute the
the
probability
probability of
of the
the intersection
intersection of
of two
two events.
events.

The
The law
law is
is written
written as:
as:
P(A B) = P(B)P(A|B)
 Multiplication Law

Event M = Markley Oil Profitable

Event C = Collins Mining Profitable
M C = Markley Oil Profitable
and Collins Mining Profitable
We know: P(M) = .70, P(C|M) = .5143
Thus: P(M  C) = P(M)P(M|C)
= (.70)(.5143)
= .36
(This result is the same as that obtained earlier
using the definition of the probability of an event.)
 Independent Events

IfIf the
the probability
probability ofof event
event A
A is
is not
not changed
changed byby the
the
existence
existence of of event
event B,
B, we
we would
would saysay that
that events
events AA
and
and BB areare independent.
independent.

Two
Two events
events A
A and
and BB are
are independent
independent if:
if:
P(A|B) = P(A) or P(B|A) = P(B)
 Multiplication Law
for Independent Events

The
The multiplication
multiplication law
law also
also can
can be
be used
used as
as aa test
test to
to see
see
ifif two
two events
events are
are independent.
independent.

The
The law
law is
is written
written as:
as:
P(A B) = P(A)P(B)
 Multiplication Law
for Independent Events

Event M = Markley Oil Profitable

Event C = Collins Mining Profitable
Are events M and C independent?
DoesP(M  C) = P(M)P(C) ?
We know: P(M  C) = .36, P(M) = .70, P(C) = .48
But: P(M)P(C) = (.70)(.48) = .34, not .36
Hence: M and C are not independent.
Bayes’ Theorem
 Often we begin probability analysis with initial or
prior probabilities.
 Then, from a sample, special report, or a product
test we obtain some additional information.
 Given this information, we calculate revised or
posterior probabilities.
 Bayes’ theorem provides the means for revising the
prior probabilities.

Application
Application
Prior
Prior New
New Posterior
Posterior
of
of Bayes’
Bayes’
Probabilities
Probabilities Information
Information Probabilities
Probabilities
Theorem
Theorem
 Bayes’ Theorem

Example: L. S. Clothiers
A proposed shopping center
will provide strong competition
for downtown businesses like
L. S. Clothiers. If the shopping
center is built, the owner of
L. S. Clothiers feels it would be best to
relocate to the center.

The shopping center cannot be built unless a

zoning change is approved by the town council. The
planning board must first make a recommendation, for
or against the zoning change, to the council.
 Bayes’ Theorem

 Prior Probabilities
Let:
A1 = town council approves the zoning change
A2 = town council disapproves the change

Using subjective judgment:

P(A1) = .7, P(A2) = .3

Bayes’ Theorem

 New Information
The planning board has recommended against the zoning change. Let B denote the
event of a negative recommendation by the planning board.
Given that B has occurred, should L. S. Clothiers revise the probabilities that the
town council will approve or disapprove the zoning change?
 Bayes’ Theorem

Conditional Probabilities
Past history with the planning board and the
town council indicates the following:

P(B|A1) = .2 P(B|A2) = .9

Hence: P(BC|A1) = .8 P(BC|A2) = .1

 Bayes’ Theorem

Tree Diagram

Town Council Planning Board Experimental

Outcomes

P(B|A1) = .2
P(A1  B) = .14
P(A1) = .7
c
P(B |A1) = .8 P(A1  Bc) = .56

P(B|A2) = .9
P(A2  B) = .27
P(A2) = .3
c P(A2  Bc) = .03
P(B |A2) = .1
Bayes’ Theorem
To find the posterior probability that event Ai will
occur given that event B has occurred, we apply
Bayes’ theorem.
P( Ai )P( B| Ai )
P( Ai |B) 
P( A1 )P( B| A1 )  P( A2 )P( B| A2 )  ...  P( An )P( B| An )

Bayes’ theorem is applicable when the events for

which we want to compute posterior probabilities
are mutually exclusive and their union is the entire
sample space.
Bayes’ Theorem

 Posterior Probabilities
Given the planning board’s recommendation not to approve the zoning change,
we revise the prior probabilities as follows:

P( A1 )P( B| A1 )
P( A1 |B) 
P( A1 )P( B| A1 )  P( A2 )P( B| A2 )
(. 7 )(. 2 )

(. 7 )(. 2 )  (. 3)(. 9)

= .34
 Bayes’ Theorem

Conclusion
The planning board’s recommendation is good news
for L. S. Clothiers. The posterior probability of the town
council approving the zoning change is .34 compared to a
prior probability of .70.
 Tabular Approach
 Step 1
Prepare the following three columns:

Column 1 - The mutually exclusive events for which

posterior probabilities are desired.
Column 2 - The prior probabilities for the events.
Column 3 - The conditional probabilities of the new
information given each event.
 Tabular Approach
(1) (2) (3) (4) (5)
Prior Conditional
Events Probabilities Probabilities

Ai P(Ai) P(B|Ai)

A1 .7 .2
A2 .3 .9
1.0
 Tabular Approach
 Step 2
Column 4
Compute the joint probabilities for each event and the new
information B by using the multiplication law.
Multiply the prior probabilities in column 2 by the
corresponding conditional probabilities in column 3. That is, P(Ai
IB) = P(Ai) P(B|Ai).
 Tabular Approach
(1) (2) (3) (4) (5)
Prior Conditional Joint
Events Probabilities Probabilities Probabilities

Ai P(Ai) P(B|Ai) P(Ai I B)

A1 .7 .2 .14
A2 .3 .9 .27 .7
.7 xx .2
.2
1.0
 Tabular Approach

 Step 2 (continued)

We see that there is a .14 probability of the town

council approving the zoning change and a negative
recommendation by the planning board.
There is a .27 probability of the town council
disapproving the zoning change and a negative
recommendation by the planning board.
 Tabular Approach
 Step 3

Column 4
Sum the joint probabilities. The sum is the
probability of the new information, P(B). The sum
.14 + .27 shows an overall probability of .41 of a
negative recommendation by the planning board.
 Tabular Approach
(1) (2) (3) (4) (5)
Prior Conditional Joint
Events Probabilities Probabilities Probabilities

Ai P(Ai) P(B|Ai) P(Ai I B)

A1 .7 .2 .14
A2 .3 .9 .27
1.0 P(B) = .41
 Tabular Approach
 Step 4
Column 5
Compute the posterior probabilities using the basic relationship
of conditional probability.

P( Ai  B )
P ( Ai | B ) 
P( B)

The joint probabilities P(Ai I B) are in column 4 and the

probability P(B) is the sum of column 4.
 Tabular Approach
(1) (2) (3) (4) (5)
Prior Conditional Joint Posterior
Events Probabilities Probabilities Probabilities Probabilities

Ai P(Ai) P(B|Ai) P(Ai I B) P(Ai |B)

A1 .7 .2 .14 .3415

A2 .3 .9 .27 .6585
1.0 P(B) = .41 1.0000
.14/.41
.14/.41
Discrete Probability Distributions
Random Variables
Discrete Probability Distributions
Expected Value and Variance
Binomial Distribution
Poisson Distribution
Hypergeometric Distribution
.40

.30

.20

.10

0 1 2 3 4
 Random Variables

A
A random
random variable
variable is
is aa numerical
numerical description
description of
of the
the
outcome
outcome of
of an
an experiment.
experiment.

AA discrete
discrete random
random variable
variable may
may assume
assume either
either aa
finite
finite number
number ofof values
values or
or an
an infinite
infinite sequence
sequence of of
values.
values.

AA continuous
continuous random
random variable
variable may
may assume
assume any
any
numerical
numerical value
value in
in an
an interval
interval or
or collection
collection of
of
intervals.
intervals.
Example: JSL Appliances
 Discrete random variable with a finite number of values

Let
Let xx == number
number of
of TVs
TVs sold
sold at
at the
the store
store in
in one
one day,
day,
where
where xx can
can take
take on
on 55 values
values (0,
(0, 1,
1, 2,
2, 3,
3, 4)
4)
 Example: JSL Appliances

Discrete random variable with an infinite sequence of

values

Let
Let xx == number
number of
of customers
customers arriving
arriving in
in one
one day, day,
where
where xx can
can take
take on
on the
the values
values 0,
0, 1,
1, 2,
2, .. .. ..

We can count the customers arriving, but there is no

finite upper limit on the number that might arrive.
 Random Variables

Question Random Variable x Type

Family x = Number of dependents Discrete
size reported on tax return

Distance from x = Distance in miles from Continuous

home to store home to the store site
Own dog x = 1 if own no pet; Discrete
or cat = 2 if own dog(s) only;
= 3 if own cat(s) only;
= 4 if own dog(s) and cat(s)
 Discrete Probability Distributions

The
The probability
probability distribution
distribution for
for aa random
random variable
variable
describes
describes how
how probabilities
probabilities are
are distributed
distributed over
over
the
the values
values of
of the
the random
random variable.
variable.

We
We can
can describe
describe aa discrete
discrete probability
probability distribution
distribution
with
with aa table,
table, graph,
graph, or
or equation.
equation.
 Discrete Probability Distributions

The
The probability
probability distribution
distribution is
is defined
defined by by aa
probability
probability function,
function, denoted
denoted byby f(x),
f(x), which
which provides
provides
the
the probability
probability for
for each
each value
value ofof the
the random
random variable.
variable.

The
The required
required conditions
conditions for
for aa discrete
discrete probability
probability
function
function are:
are:
f(x) > 0

f(x) = 1
 Discrete Probability Distributions

Using past data on TV sales, …

a tabular representation of the probability
distribution for TV sales was developed.

Number 80/200
Units Sold of Days x f(x)
0 80 0 .40
1 50 1 .25
2 40 2 .20
3 10 3 .05
4 20 4 .10
200 1.00
 Discrete Probability Distributions

 Graphical Representation of Probability Distribution

.50
.40

Probability
.30
.20
.10

0 1 2 3 4
Values of Random Variable x (TV sales)
Discrete Uniform Probability Distribution

The
The discrete
discrete uniform
uniform probability
probability distribution
distribution is
is the
the
simplest
simplest example
example ofof aa discrete
discrete probability
probability
distribution
distribution given
given by
by aa formula.
formula.

The
The discrete
discrete uniform
uniform probability
probability function
function is
is
the values of the
f(x) = 1/n random variable
are equally likely
where:
n = the number of values the random
variable may assume
Expected Value and Variance

The
The expected
expected value,
value, oror mean,
mean, ofof aa random
random variable
variable
is
is aa measure
measure of
of its
its central
central location.
location.
E(x) =  = xf(x)

The
The variance
variance summarizes
summarizes the
the variability
variability in
in the
the
values
values of
of aa random
random variable.
variable.
Var(x) =  2 = (x - )2f(x)

The
The standard deviation, ,, is
standard deviation, is defined
defined as
as the
the positive
positive
square
square root
root of
of the
the variance.
variance.
Expected Value and Variance
 Expected Value

x f(x) xf(x)
0 .40 .00
1 .25 .25
2 .20 .40
3 .05 .15
4 .10 .40
E(x) = 1.20

expected number of
TVs sold in a day
Expected Value and Variance
 Variance and Standard Deviation

x x- (x - )2 f(x) (x - )2f(x)

0 -1.2 1.44 .40 .576

1 -0.2 0.04 .25 .010
2 0.8 0.64 .20 .128
3 1.8 3.24 .05 .162
4 2.8 7.84 .10 .784 TVs
squared
Variance of daily sales = s 2 = 1.660
Standard deviation of daily sales = 1.2884 TVs
Binomial Distribution
 Four Properties of a Binomial Experiment

1.
1. The
The experiment
experiment consists
consists of
of aa sequence
sequence of
of nn
identical
identical trials.
trials.

2.
2. Two
Two outcomes,
outcomes, success
success and
and failure,
failure, are
are possible
possible
on
on each
each trial.
trial.

3.
3. The
The probability
probability of
of aa success,
success, denoted
denoted by
by p,
p, does
does
not
not change
change from
from trial
trial to
to trial.
trial.
stationarity
4. The trials are independent. assumption
4. The trials are independent.
Binomial Distribution
Our
Our interest
interest is
is in
in the
the number
number of
of successes
successes
occurring
occurring in
in the
the nn trials.
trials.

We
We let
let xx denote
denote thethe number
number of
of successes
successes
occurring
occurring inin the
the nn trials.
trials.
 Binomial Distribution

 Binomial Probability Function

n!
f (x)  p x (1  p )( n  x )
x !(n  x )!

where:
f(x) = the probability of x successes in n trials
n = the number of trials
p = the probability of success on any one trial
 Binomial Distribution

Binomial Probability Function

n!
f (x)  p x (1  p )( n  x )
x !( n  x )!

n!
p x (1  p )( n  x )
x !( n  x )!
Probability
Probability of
of aa particular
particular
Number
Number ofof experimental
experimental sequence
sequence ofof trial
trial outcomes
outcomes
outcomes
outcomes providing
providing exactly
exactly with
with xx successes
successes inin nn trials
trials
xx successes
successes in
in nn trials
trials
 Binomial Distribution

Example: Evans Electronics

Evans is concerned about a low retention rate for
employees. In recent years, management has seen a
turnover of 10% of the hourly employees annually.
Thus, for any hourly employee chosen at random,
management estimates a probability of 0.1 that the
person will not be with the company next year.
 Binomial Distribution

Using the Binomial Probability Function

Choosing 3 hourly employees at random, what is
the probability that 1 of them will leave the company
this year?

Let: p = .10, n = 3, x = 1
n!
f ( x)  p x (1  p ) ( n  x )
x !( n  x )!
3!
f (1)  (0.1)1 (0.9)2  3(.1)(.81)  .243
1!(3  1)!
Binomial Distribution
 Tree Diagram

1st Worker 2nd Worker 3rd Worker x Prob.

L (.1) 3 .0010
Leaves (.1)
S (.9) 2 .0090
Leaves
(.1) L (.1) 2 .0090
Stays (.9)
S (.9) 1 .0810
L (.1) 2 .0090
Leaves (.1)
Stays S (.9) 1 .0810
(.9) L (.1)
1 .0810
Stays (.9)
S (.9) 0 .7290
 Binomial Distribution

 Using Tables of Binomial Probabilities

p
n x .05 .10 .15 .20 .25 .30 .35 .40 .45 .50
3 0 .8574 .7290 .6141 .5120 .4219 .3430 .2746 .2160 .1664 .1250
1 .1354 .2430 .3251 .3840 .4219 .4410 .4436 .4320 .4084 .3750
2 .0071 .0270 .0574 .0960 .1406 .1890 .2389 .2880 .3341 .3750
3 .0001 .0010 .0034 .0080 .0156 .0270 .0429 .0640 .0911 .1250
Binomial Distribution
 Expected Value

E(x) =  = np
 Variance
Var(x) =  2 = np(1 - p)

 Standard Deviation

  np(1  p )
Binomial Distribution
 Expected Value

E(x) =  = 3(.1) = .3 employees out of 3

 Variance

Var(x) =  2 = 3(.1)(.9) = .27

 Standard Deviation

  3(.1)(.9)  .52 employees

 Poisson Distribution

A
A Poisson
Poisson distributed
distributed random
random variable
variable is
is often
often
useful
useful in
in estimating
estimating the
the number
number of of occurrences
occurrences
over
over aa specified
specified interval
interval of
of time
time or
or space
space

ItIt is
is aa discrete
discrete random
random variable
variable that
that may
may assume
assume
an
an infinite
infinite sequence
sequence of
of values
values (x
(x == 0,
0, 1,
1, 2,
2, .. .. .. ).).
 Poisson Distribution

Examples
Examples of
of aa Poisson
Poisson distributed
distributed random
random variable:
variable:

the
the number
number of
of knotholes
knotholes in
in 14
14 linear
linear feet
feet of
of
pine
pine board
board

the
the number
number ofof vehicles
vehicles arriving
arriving at
at aa
toll
toll booth
booth in
in one
one hour
hour
 Poisson Distribution

 Two Properties of a Poisson Experiment

1.
1. The
The probability
probability of
of an
an occurrence
occurrence is
is the
the same
same
for
for any
any two
two intervals
intervals of
of equal
equal length.
length.

2.
2. The
The occurrence
occurrence or
or nonoccurrence
nonoccurrence in
in any
any
interval
interval is
is independent
independent of
of the
the occurrence
occurrence or
or
nonoccurrence
nonoccurrence in in any
any other
other interval.
interval.
Poisson Distribution
 Poisson Probability Function

 x e
f ( x) 
x!
where:
f(x) = probability of x occurrences in an interval
 = mean number of occurrences in an interval
e = 2.71828
Poisson Distribution
 Example: Mercy Hospital
Patients arrive at the MERCY
emergency room of Mercy
Hospital at the average
rate of 6 per hour on
weekend evenings.
What is the
probability of 4 arrivals in
30 minutes on a weekend evening?
 MERCY
Poisson Distribution

 Using the Poisson Probability Function

 = 6/hour = 3/half-hour, x = 4
34 (2.71828)3
f (4)   .1680
4!
 MERCY
Poisson Distribution

 Using Poisson Probability Tables


x 2.1 2.2 2.3 2.4 2.5 2.6 2.7 2.8 2.9 3.0
0 .1225 .1108 .1003 .0907 .0821 .0743 .0672 .0608 .0550 .0498
1 .2572 .2438 .2306 .2177 .2052 .1931 .1815 .1703 .1596 .1494
2 .2700 .2681 .2652 .2613 .2565 .2510 .2450 .2384 .2314 .2240
3 .1890 .1966 .2033 .2090 .2138 .2176 .2205 .2225 .2237 .2240
4 .0992 .1082 .1169 .1254 .1336 .1414 .1488 .1557 .1622 .1680
5 .0417 .0476 .0538 .0602 ..0668 .0735 .0804 .0872 .0940 .1008
6 .0146 .0174 .0206 .0241 .0278 .0319 .0362 .0407 .0455 .0504
7 .0044 .0055 .0068 .0083 .0099 .0118 .0139 .0163 .0188 .0216
8 .0011 .0015 .0019 .0025 .0031 .0038 .0047 .0057 .0068 .0081
 MERCY
Poisson Distribution

 Poisson Distribution of Arrivals

Poisson Probabilities
0.25

Probability 0.20

0.15 actually,
the sequence
0.10 continues:
11, 12, …
0.05

0.00
0 1 2 3 4 5 6 7 8 9 10
Number of Arrivals in 30 Minutes
 Poisson Distribution

AA property
property of
of the
the Poisson
Poisson distribution
distribution is
is that
that
the
the mean
mean and
and variance
variance are
are equal.
equal.
m=s2
 MERCY
Poisson Distribution

 Variance for Number of Arrivals

During 30-Minute Periods

mm == ss 22 == 33