QUANTITATIVE TECHNIQUES FOR Dr.

Pritha Guha
MANAGERIAL DECISION - 1 (QTMD1G21-1)
08-07-2021 1
08-07-2021 2
NEGATIVE BINOMIAL RANDOM VARIABLE
The experiment continues (trials are performed) until a total of r successes have been observed,
where r is a specified positive integer.

X = Number of trials needed to obtain the r-th success

𝑥−1
𝑃 𝑋=𝑥 = (1 − 𝑝)𝑥−𝑟 𝑝𝑟
𝑟−1
E(X) = r/p,
Var(X) = r(1-p)/p2
08-07-2021 3
08-07-2021 4
 X: number of trials needed for rth success

NEGATIVE X ~ Negative Binomial(r,p)

(Note: no. of failures = no. of trials – r)
BINOMIAL R:
DISTRIBUTION: • p.m.f. of no. of failures: dnbinom(x,r,p)
• c.d.f. of no. of failures: pnbinom(x,r,p)
GENERAL SETUP Survival function:
pnbinom(x,r,p,lower.tail = FALSE)

08-07-2021 5
 If X ~ Geometric(p) and Y ~ Geometric(p) are
independent, then X+Y ~ NB(2,p).

ADDITIVE In general, if X ~ NB(r1,p) and Y ~ NB(r2,p) are

independent, then X+Y ~ NB(r1+r2,p).
PROPERTY
Note: p has to be the same, and independence is
needed.

08-07-2021 6
PROBLEM
Suppose that a telemarketing company salesman is making phone calls to find potential
customers. She is new to her job. Her seniors in the company told her that the chances of making
a sale is 2% initially.
a) What is the probability that she makes no sale in her first 10 phone calls?

08-07-2021 7
PROBLEM
Suppose that a telemarketing company salesman is making phone calls to find potential
customers. She is new to her job. Her seniors in the company told her that the chances of making
a sale is 2% initially.
b) What is the probability she makes her first sale in the 11th phone call?

08-07-2021 8
PROBLEM
Suppose that a telemarketing company salesman is making phone calls to find potential
customers. She is new to her job. Her seniors in the company told her that the chances of making
a sale is 2% initially.
c) What is the probability that there is at least one sale in the first 11 phone calls?

08-07-2021 9
PROBLEM
Suppose that a telemarketing company salesman is making phone calls to find potential
customers. She is new to her job. Her seniors in the company told her that the chances of making
a sale is 2% initially.
d) Suppose that her manager has given her a target. She must make 5 sales by the end of the
week. What is the probability that she can meet her target on 50th phone calls?

08-07-2021 10
PROBLEM
Suppose that a telemarketing company salesman is making phone calls to find potential
customers. She is new to her job. Her seniors in the company told her that the chances of making
a sale is 2% initially.
e) What is the probability that she makes at least 3 sales in the first 50 phone calls?

08-07-2021 11
MORE WITH BERNOULLI TRIALS…
Let us keep on repeating the Bernoulli Trials…

… and count the number of time we get “success”.

08-07-2021 12
 n independent trials with probability of success p
X = Number of times “success” occurs
A binomial random variable X is defined as the number of
successes achieved in the n trials of a Bernoulli process.
BINOMIAL Notation: 𝑋 ~ 𝐵𝑖𝑛(𝑛, 𝑝)
RANDOM p.m.f.: 𝑃 𝑋 = 𝑥 = 𝑛𝑥 𝑝 𝑥 (1 − 𝑝)𝑛−𝑥 , 𝑥 = 0, 1, 2, … , 𝑛.

VARIABLE: 𝐸 𝑋 = 𝑛𝑝
𝑉𝑎𝑟 𝑋 = 𝑛𝑝 1 − 𝑝
BIN(N,P) 𝑆𝐷 𝑋 = 𝑛𝑝(1 − 𝑝)
In R:
• p.m.f. of the number of successes: dbinom(x,n,p)
• c.d.f. of the number of successes: pbinom(x,n,p)

08-07-2021 13
PROBLEM 4.25, TEXTBOOK PG. 165
A box containing a dozen eggs are examined. The probability that an egg would be broken
is 0.1 and is independent of whether other eggs are broken or not.
If X denotes the number of broken eggs in the box,
a) Find P(X=0)

08-07-2021 14
PROBLEM 4.25, TEXTBOOK PG. 165
A box containing a dozen eggs are examined. The probability that an egg would be broken
is 0.1 and is independent of whether other eggs are broken or not.
If X denotes the number of broken eggs in the box,
b) If a box containing more than 1 broken egg is rejected, calculate the probability that a
given box will be rejected?

08-07-2021 15
PROBLEM 4.25, TEXTBOOK PG. 165
A box containing a dozen eggs are examined. The probability that an egg would be broken
is 0.1 and is independent of whether other eggs are broken or not.
If X denotes the number of broken eggs in the box,
c) Find E(X).

08-07-2021 16
 If X~Bin(n, p) and Y~Bin(m, p) are independent, then
X+Y~Bin(n+m, p).

ADDITIVE Note:
PROPERTY • p has to be the same, and independence is needed.
• The above also means that Bin(n,p) is sum of n
independent Bin(1,p), or Ber(p).

17
08-07-2021 18
 BINOMIAL DISTRIBUTION PLOTS
08-07-2021 19
APPROXIMATIONS TO BINOMIAL DISTRIBUTION
Case 1. “Large n”, np and n(1-p) “large”. Use “normal” approximation.
We shall come back to this after we discuss continuous distributions.

08-07-2021 20
APPROXIMATIONS TO BINOMIAL DISTRIBUTION
Case 2. “Large n”, “small p”,(or “small 1-p”), “moderate λ = np”. Use “Poisson” approximation.
→ “Small p”: rare event.

08-07-2021 21
 Used to model rare events
Also used to approximate a Bin(n,p) random variable
with large n and small p such than np = λ is moderate
X = number of events: rate λ

POISSON p.m.f.: P(X=x) = e−λ

λx

x!
; x = 0, 1, 2, ...

DISTRIBUTION E(X) = λ
Var(X) = λ
R:
• dpois(x,λ)
• ppois(x,λ)

08-07-2021 22
PROBLEM 4.60, TEXTBOOK PG. 167
In an express highway toll-booth, on average 120 cars pass a specified point in any given hour.
It is estimated if more than 3 cars arrive at any given minute, there will be a congestion at the
toll booth.
a) Find the probability that the toll booth will be congested at some specific minute.

08-07-2021 23
PROBLEM 4.60, TEXTBOOK PG. 167
In an express highway toll-booth, on average 120 cars pass a specified point in any given hour.
It is estimated if more than 3 cars arrive at any given minute, there will be a congestion at the
toll booth.
b) Suppose you know that the toll-booth is congested between 11:05AM-11:06AM. What is the
probability that there are only 5 cars in the toll-booth?

08-07-2021 24
 If X ~ Poisson(λ1) and Y ~ Poisson(λ2) are independent,
then X+Y ~ Poisson(λ1+λ2).

ADDITIVE
PROPERTY Note:
• Independence is needed
• No restriction on rates

08-07-2021 25
08-07-2021 26
 SOME PROBLEMS
08-07-2021 27
PROBLEM 4.40, TEXTBOOK PG. 166
A department of 10 employees has a wifi facility which connects a maximum of 3 devices at a
time. If there is a 30% chance that an employee will need internet at a particular time, find the
probability that wifi is not enough at a certain time.

08-07-2021 28
Problem 4.13, Textbook pg. 163
An airline operates a flight having 50 seats. As they expect some passengers to not show up,
they overbook the flight by selling 51 tickets. The probability that an individual passenger will
not show up is 0.01, independent of all other passengers.
Each ticket costs Rs. 10,000 and is non-refundable if a passenger fails to show up.
If a passenger shows up and a seat is not available, the airline has to pay a compensation of
Rs. 1,00,000 to the passenger.
What is the expected revenue of the airline?

08-07-2021 29
08-07-2021 30
PROBLEM 4.44, TEXTBOOK PG. 166
A satellite system consists of n components and functions on any given day if at least k of the n-
components function on that day. On a rainy day, each of the components independently function
with probability p1, whereas on a dry day, each components independently function with
probability p2. If the probability of rain tomorrow is α, what is the probability that the satellite
system will function?

08-07-2021 31
08-07-2021 32
08-07-2021 33