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Unformatted text preview: Chapter 6: Probability 6.1 Assigning Probability to Events • Random Experiment – an action or process that leads to one of several possible outcomes • Sample Space – a list of all possible outcomes of the experiment. The outcomes must be exhaustive and mutually exclusive. • Requirement of Probabilities – Given a sample space S = {O 1 ,O 2 , … ,O k }, the probabilities assigned to the outcomes must satisfy two requirements 1. The probability of any outcome must lie between 0 and 1. That is, for each 2. The sum of the probabilities of all outcomes in a sample space must be 1. That is, • Three Approaches to Assigning Probabilities 1. Classical approach – used by mathematicians to help determine probability associated with games of chance 2. Relative frequency approach – defines probability as the longrun relative frequency with which an outcome occurs 3. Subjective approach – defines probability as the degree of belief that we hold in the occurrence of an event. Used when it is not reasonable to use the classical approach and there is no history of the an event....
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 Fall '11
 tanaka
 Economics, Conditional Probability, Probability, Probability theory, Union of events

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