Managing Uncertainty I:

Probability and Discrete

Distributions

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Zippy Bright
• Zippy Bright manufactures electric toothbrushes that are sold
through large retail outlets. Zippy Bright is concerned with
how variable the sales are at different stores. They requested
and received a year of weekly sales data on their premiere
product, the XP219, for three stores from one of their
retailers, Sellco.
• What can we say about the weekly sales in store A?
Week Unit Sales Week Unit Sales Week Unit Sales Week Unit Sales Week Unit Sales
1 1 11 3 21 2 31 1 41 2
2 5 12 2 22 4 32 2 42 3
3 3 13 3 23 4 33 3 43 3
4 2 14 4 24 3 34 4 44 3
5 3 15 2 25 4 35 5 45 4
6 3 16 1 26 1 36 5 46 1
7 3 17 3 27 2 37 1 47 2
8 2 18 4 28 3 38 5 48 3
9 5 19 4 29 4 39 5 49 4
10 2 20 3 30 4 40 1 50 2

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Zippy Bright – Graphing it out!

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Zippy Bright - Distributions
A histogram for the weekly sales.
Weekly Sales at Store A • A graphical representation of the distribution by mutually
20 exclusive and collectively exhaustive “bins” or intervals.
Number of Weeks

15 • Shows relative probability of each interval.

10

5
PMF of Weekly Sales at Store A
35%
0 30%
30%
1 2 3 4 5
25% 22% 22%
Sales per Week
20%
14%
15% 12%
10%

The Probability Mass Function 5%

• Probability of each discrete random variable 0%

1 2 3 4 5
• Probabilities sum to 100% or 1.00 Sales per Week

Probability Table Cumulative Distribution of Sales

100%
100% 88%
Cumulative 80%
Value Probability Probability 66%
60%
1 14% 14%
36%
2 22% 36% 40%
3 30% 66% 20% 14%
4 22% 88% 0%
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5 12% 100% 1 2 3 4 5
Sales per Week 4
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Basic Probability Laws 1 & 2

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 Basic Probability
• Probability Theory
n Mathematical framework for analyzing random events or experiments.
n Experiments are events we cannot predict with certainty, e.g., weekly sales!
• Notation Events:
n P(A) = probability that event A occurs, • A = “Sales = 5 units”
• B = “Sales ≥4 units”
w P(A)= 0.12
• C = “Sales are an Odd number”
w P(B)= P(4) + P(5) = 0.34 • D = “Sales are ≤2 units”
w P(C) = P(1) + P(3) + P(5) = .14 + .30 + .12 = 0.56
n P(A’) = complement of P(A) = probability some other event that is not A occurs
w P(A’)= 1 – P(A) = 0.88
w P(B’)= 1 – P(B) = 0.66
w P(C‘) = 1 – P(C) = 1 - 0.56 = 0.44
Cumulative • P(B U C) = P[(Sales≥4) OR (Sales =1,3,5)]
Value Probability Probability = P[Sales = 1, 3, 4, or 5] = 0.78
• P(B C) = P[(Sales≥4) AND (Sales =1,3,5)]
U
1 .14 .14
= P[Sales = 5] = 0.12
2 .22 .36
• P(A D) = P[(Sales=5) AND (Sales≤2)] = 0
U
3 .30 .66
• P(A U A’) = P[(Sales=5) OR (Sales≠5)] = 1.00
4 .22 .88
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Four Laws
Cumulative Events:
Value Probability Probability
1 .14 .14
• A = “Sales = 5 units”

of Probability 2 .22 .36 • B = “Sales ≥4 units”

3 .30 .66 • C = “Sales are an Odd number”
4 .22 .88 • D = “Sales are ≤2 units”
5 .12 1.00

1. Probability of any event is between 0 and 1

• P(Sales>6) = 0
0 ≤ P(A) ≤ 1 • P(1, 2, 3, 5)= 0.78
• P(Sales <6) = 1
• P(Sales < 1) = 0

2. If A and B are mutually exclusive events, then

P(A or B) = P(A U B) = P(A) + P(B)
• P(A U D) = P[(Sales=5) OR (Sales =1 or 2)]
= P(Sales=5) + P(Sales =1 or 2) = .12 + .36 = 0.48
• P(B U C) = P[(Sales≥4) OR (Sales =1,3,5)] = P[Sales = 1, 3, 4, or 5] = 0.78
≠ P(Sales≥4) + P(Sales =1,3,5)] = .34 + .56 = .90 why?????
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Basic Probability Laws 3 & 4

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Four Laws
Cumulative Events:
Value Probability Probability
1 .14 .14
• A = “Sales = 5 units”

of Probability 2 .22 .36 • B = “Sales ≥4 units”

3 .30 .66 • C = “Sales are an Odd number”
4 .22 .88 • D = “Sales are ≤2 units”
5 .12 1.00

Conditional Probability
P(A|B) = Probability that Event A occurs, GIVEN THAT Event B has occurred.
e.g., P(D|C) = P[(Sales≤2) Given That (Sales=1, 3, or 5)]

3. If A and B are any two events, then

P(D|C) = P[(Sales≤2) Given That (Sales=1, 3, or 5)] = P(Sales=1) / P(Sales=1, 3, or 5) = .14 / .56 = 0.25
P(A|B) = P[(Sales=5) Given That (Sales≥4) = P(Sales=5) / P(Sales≥4) = .12 / .34 = 0.35
P(B|A) = P[(Sales≥4) Given That (Sales=5) = P(Sales=5) / P(Sales=5) = .12 / .12 = 1.00

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Four Laws
Cumulative Events:
Value Probability Probability
1 .14 .14
• A = “Sales = 5 units”

of Probability 2 .22 .36 • B = “Sales ≥4 units”

3 .30 .66 • C = “Sales are an Odd number”
4 .22 .88 • D = “Sales are ≤2 units”
5 .12 1.00

Independence
A and B are independent if knowing that B occurred
does not influence the probability of A occurring

4. If A and B are independent events, then

P(A | B) = P(A)

Are Events C and A independent? Let’s test it!

• If P(C|A) = P(C) (that is the probability that sales are odd given that we sold 5 units),
then A and C are independent events.
• P(C|A) = P(C and A)/P(A) = P[(Sale=1, 3, or 5) and (Sales=5)] / P(Sales=5)
= P(Sales=5) / P(Sales=5) = 1.00
• Since this is not P(C) = 0.56, these are not independent events.
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Key Points

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Key Points
• Probability Laws
n Probability of any event is between 0 and 1 0 ≤ P(A) ≤ 1
n If A and B are mutually exclusive events, then
P(A or B) = P(A U B) = P(A) + P(B)
n If A and B are any two events, then

n If A and B are independent events, then

P(A | B) = P(A)

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