PROBABILITY ANALYSIS

Session 07

Dr. Aditya Kumar Sahu

◼ Quick Recap!

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Learning Outcome

1. Discrete Probability Distributions:

 Bernoulli Distribution
 Binomial Distribution
 Case: Go Bananas!
 Geometric Distribution
 Poisson
 Hypergeometric

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 Bivariate Distributions

Joint Probability Mass Function

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◼ Let random variable X1 represents the no. of PGP students arriving at Nescafe
between 2 PM to 4PM
◼ Let random variable X2 represents the no. of IPM students arriving at Nescafe
between 2 PM to 4PM

Y= No. of students from IPM and PGP jointly arriving at IIM Rohtak Nescafe Store 5
Discrete Probability Distributions

◼ In addition to tables and graphs, a formula that gives the probability

function, f(x), for every value of x is often used to describe the
probability distributions.

◼ Several discrete probability distributions specified by formulas are

the:
❑ Discrete-uniform,
❑ Binomial,
❑ Poisson, and
❑ Hypergeometric distributions.

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Distribution of Random Variable

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 Bernoulli Random Variable

• If an experiment consists of a single trial and the outcome of the trial can only be
either a success* or a failure, then the trial is called a Bernoulli trial.

• The number of success X in one Bernoulli trial, which can be 1 or 0, is a

Bernoulli random variable.

• If p is the probability of success in a Bernoulli experiment,

then P(1) = p, P(0) = 1 – p,

• 𝑓 𝑥 = 𝑝 𝑥 (1 − 𝑝)(1−𝑥)
• E(X) = p and Var(X) = p(1 – p).

* The terms success and failure are simply statistical terms, and do not have positive or
negative implications. In a production setting, finding a defective product may be
termed a “success,” although it is not a positive result.
𝒇 𝒙 = 𝒑𝒙 (𝟏 − 𝒑)(𝟏−𝒙)

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 Caselet-1.1

In a manufacturing enterprise, the products were categorized as either

defective and non defective. Past experience shows that 20% of the
items are defective. A quality inspection manager random selects an
item and wants to calculate the probability of defective product.
Assuming the experiment to be a Bernoulli trial, find the P.M.F, mean
and variance.

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 Binomial Probability Distribution
◼ Four Properties of a Binomial Experiment
1. The experiment consists of a sequence of n identical bernoulli trials.
2. Two outcomes, success and failure, are possible on each trial.
3. The probability of a success, denoted by p, does not change from trial
to trial. (This is referred to as the stationarity assumption.)
4. The trials are independent.

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 Binomial Probability Distribution

• Our interest is in the number of successes occurring in the n trials.

• We let x denote the number of successes occurring in the n trials.

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 Binomial Probability Distribution
• Binomial Probability Function
𝑛!
𝑓 𝑥 = 𝑝 𝑥 (1 − 𝑝)(𝑛−𝑥)
𝑥! 𝑛 − 𝑥 !
where:
x = the number of successes
p = the probability of a success on one trial
n = the number of trials
f(x) = the probability of x successes in n trials
n! = n(n – 1)(n – 2) ….. (2)(1)

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 Mean, Variance, and Standard Deviation of the Binomial Distribution
• Expected Value
E(x) =  = np

• Variance
Var(x) =  2 = np(1 – p)

• Standard Deviation
𝜎= 𝑛𝑝(1 − 𝑝)

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 Caselet-1.2

In a manufacturing enterprise, the products were categorized as either

defective and non defective. Past experience shows that 20% of the
items are defective. A quality inspection manager random selects 20
items. What is the probability that exactly five items are defective
product. Also calculate the mean, Variance and Standard deviation.

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 Caselet 1.3

◼ The overall percentage of failures in a certain examination is 40.

What is the probability that out of a group of 6 candidates 4 passed
the examination?

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 Case

◼ Go Bananas!

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◼ Great Grasslands Grains, Inc. (GGG) manufactures and sells a wide variety of
breakfast cereals. GGG’s product development lab recently created a new cereal
that consists of rice flakes and banana-flavored marshmallows. The company’s
marketing research department has tested the new cereal extensively and has
found that consumers are enthusiastic about the cereal when 16-ounce boxes
contain at least 1.6 ounces and no more than 2.4 ounces of the banana-flavored
marshmallows.
◼ As GGG prepares to begin producing and selling 16-ounce boxes of the new
cereal, which it has named Go Bananas!, management is concerned about the
amount of banana- flavored marshmallows. It wants to be careful not to include
less than 1.6 ounces or more than 2.4 ounces of banana-flavored marshmallows
in each 16-ounce box of Go Bananas!
◼ Tina finkel, VP of Production for GGG, has suggested that the company
measure the weight of banana-flavored marshmallows in a random sample of 25
boxes of Go Bananas! on a weekly basis.

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◼ Each week, GGG can count the number of boxes out of the 25 boxes in the sample
that contain less than 1.6 ounces or more than 2.4 ounces of banana-flavored marsh-
mallows; if the number of boxes that fail to meet the standard weight of banana-
flavored marshmallows is too high, production will be shut down and inspected.

◼ Ms. finkel and her staff have designed the production process so that only 8% of
all 16-ounce boxes of Go Bananas! fail to meet the standard weight of banana-
flavored marsh- mallows. After much debate, GGG management has decided to
shut down production of Go Bananas! if at least five boxes in a weekly sample fail
to meet the standard weight of banana-flavored marshmallows.

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◼ Prepare a managerial report that addresses the following issues.

1. Calculate the probability that a weekly sample will result in a shutdown of

production if the production process is working properly. Comment on GGG
management’s policy for deciding when to shut down production of go Bananas!.

2. GGG management wants to shut down production of Go Bananas! no more than

1% of the time when the production process is working properly. Suggest the
appropriate number of boxes in the weekly sample that must fail to meet the
standard weight of banana-flavored marshmallows in order for production to be
shut down if this goal is to be achieved.

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◼ Ms. Finkel has suggested that if given sufficient resources, she could redesign the
production process to reduce the percentage of 16-ounce boxes of Go Bananas!
that fail to meet the standard weight of banana-flavored marshmallows when the
process is working properly. To what level must Ms. Finkel reduce the
percentage of 16-ounce boxes of Go Bananas! that fail to meet the standard
weight of banana-flavored marsh- mallows when the process is working properly
in order for her to reduce the probability at least five of the sampled boxes fail to
meet the standard to .01 or less?

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Geometric Distribution
or
Pascal Distribution

𝑓 𝑥 = 𝑝 (1 − 𝑝)(𝑥−1)

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 Mean, Variance, and Standard Deviation of the Geometric Distribution
• Expected Value
E(x) =  = 1/p

• Variance
Var(x) =  2 = (1 – p)/ p2

• Standard Deviation
𝜎= (1 – p)/ p2

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 Caselet 1.4

◼ A company has one vacant position of a senior strategic manager to fill. 80

percentage of the applicant qualifies for the position. In order to cut the cost, the
HR team decided to stop the interview process as soon as the suitable candidate
is found. If each interview cost company $ 500.

a) What is the expected number of interviews that is required to be conducted.

b) What is the expected cost of filling this position.

c) What is the probability that the company has to conduct at most 3 interviews.

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◼ ThankYou ☺

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