probability some of the problems about chance having a great appearance of simplicity, the mind is...

Probability

Some of the Problems about Chance having a great appearance of Simplicity, the Mind is easily drawn into a belief, that their Solution may be attained by the meer Strength of natural good Sense; which generally proving otherwise and the Mistakes occasioned thereby being not unfrequent, ‘tis presumed that a Book of this Kind, which teaches to distinguish Truth from what seems so nearly to resemble it, will be looked upon as a help to good Reasoning

- Abraham de Moivre (1667-1754)

Probability Overview

• Random Generating Processes

• Probability Properties

• Probability Rules

• Example: Binomial Random Processes

Types of Explanations

A purely systematic process

A purely random process

A combination of systematic and random processes

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Data could be generated by:

Types of Explanations

A purely systematic process

A purely random process

A combination of systematic and random processes

Data could be generated by:

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G1 G20

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Hypothesis testing

We would like to know which of the three explanations is most likely correct

The “purely systematic” explanation is easy to confirm or reject based on a quick look at the data. (rarely fits social science data)

So we’re left trying to assess the question “could a purely random process fully account for this data?”

If not, we’ll accept the more complex (systematic + random) model.

Random Generating Processes

To answer that question, we need to understand random generating processes. (The domain of probability mathematics).

Note: most people intuitively over-estimate the role of systematic factors. One reason is that people often have a poor grasp of how random generating processes actually work.

Random is not the same as haphazard or helter-skelter or higgledy-piggledy.

Random generating processes yield “characteristic properties of uncertainty”.

Random Generating Processes

We have two possible outcomes (e.g. heads or tails) associated with a specific probability (e.g. 0.50)

We can’t predict with certainty the particular outcome for any trial, but we can describe the per-trial likelihood.

We can’t say too much about the relative frequency of outcomes in the short-run, but we can say a lot about the relative frequencies in the long-run.

Random Generating Processes

Example: the Binomial random process

When we say something can be described by a random generating process, we do not necessarily mean that it is caused by a mystical thing called “chance”

There may be many independent (but unmeasured) systematic factors that combine together to create the observed random probability distribution. E.g. coin tosses

When we say “random” we just mean that we can’t do any better than some basic (but characteristic) probability statements about how the outcomes will vary

Random Generating Processes

PROBABILITY

Probabilities are numbers which describe the likelihoods of random events.

The probability of an event corresponds to the per-trial likelihood of that event, as well as the long-run relative frequency of that event.

P(A) means “the probability of event A.”

If A is certain, then P(A) = 1

If A is impossible, then P(A) = 0

CHANCES and ODDS

Chances are probabilities expressed as percents. Chances range from 0% to 100%.

– For example, a probability of .75 is the same as a 75% chance.

The odds for an event is the probability that the event happens, divided by the probability that the event doesn’t happen. Odds can be any positive number.

– For example, a probability of .75 is the same as 3-to-1 odds.

Sample Space

A sample space is a list of all possible outcomes of a random process. – When I roll a die, the sample space is {1, 2, 3, 4, 5, 6}.

– When I toss a coin, the sample space is {head, tail}.

An event is one or more members of the sample space. – For example, “head” is a possible event when I toss a coin. Or “number less

than four” is a possible event when I roll a die.

– Events are associated with probabilities

Probability Properties

All probabilities are between zero and one:• 0 < P(A) < 1

Something has to happen:• P(Sample space) = 1

The probability that something happens is one minus the probability that it doesn’t:

• P(A) = 1 - P(not A)

“complement”

If equally likely outcomes

P (event A) =

totaloutcomes #

Aevent tofavorable outcomes #

What is the probability of getting exactly two heads in three coin tosses?

Total outcomes:HHHHHTHTHHTTTHHTHTTTHTTT

8

3

Analytic Approach: Theoretical probabilities

outcomes possible total#

heads oexactly tw with outcomes #

A box contains red and blue marbles. One marble is drawn at random from the box. If it is red, you win $1. If it is blue you lose $1. You can choose between two boxes.

-Box A contains 3 red marbles and 2 blue ones

-Box B contains 51 red marbles and 34 blue ones

Some Typical Probability Problems

•Anja has to pick a four digit pin number. Each digit will be between 0 and 9. What is the probability that she picks a pin number that has exactly one 3 in it?

•A certain senior class has 6 students. Two will receive $500 scholarships. What is the probability that Kim and AJ are the winning pair?

P (event A) =

totaloutcomes #

Aevent tofavorable outcomes #

Relative Frequency Approach: Observed %s

If large sample

P (event A) = long term relative frequency = n

Af )(

What is the probability that a Columbia MBA student is a narcissist?

•From a random sample of n = 250, 70 students were classified as narcissists.

Relative frequency = 28.250

70)(

n

Nf

* Justification: The law of large numbers

USA Today survey of 966 inventors who hold U.S. patents.

6 a.m. – 12 noon 290

12 noon – 6 p.m. 135

6 p.m. – 12 midnight 319

12 midnight – 6 a.m. 222

P = .14%

The general probability (relative frequency) of an event, in the absence of any other information

Unconditional Probability

More Probability Properties

The conditional probability of B, given A, is written as P(B|A). It is the probability of event B, given that A has occurred.

For example, P(short-sleeved shirt| shorts) is the probability that I will put on a short-sleeved shirt, given that I have already decided to wear shorts.

Note that P(B|A) is not the same as P(A|B).

It is very likely that I will wear a short sleeved shirt if I’m going with shorts. It is not necessarily likely that I will wear shorts just because I’m wearing a short sleeved shirt.

Conditional Probability

Sales Approach Survey

270 310

416 164

Aggressive

Passive

Sale No Sale

686 474

580

580

1160

What is the unconditional probability of making a sale?

What is the probability of making a sale, given an aggressive approach?

What is the probability of making a sale, given a passive approach?

.59 .4

7.72

Practical Application of Conditional Probability

Sensitivity: probability a test is positive, given disease is present

False Positive rate: probability a test is positive, given disease is absent

False Negative rate: probability a test is negative, given disease is present

Medical Test Survey

110 20

20 50

Test Result +

Test Result -

Disease Present

Disease Absent

130 70

130

70

200

What is the sensitivity of the test? P(+, given condition present)

What is the false negative rate? P(-, given condition present)

What is the false positive rate? P(+, given condition absent)

.85

.15.28

Events A and B are independent if the probability of event B is the same whether or not A has occurred.

If (and only if) A and B are independent, then

P(B | A) = P(B | not A) = P(B)

• For example, if I am tossing two coins, the probability that the second coin lands heads is always .50, whether or not the first coin lands heads.

Independence

Superstition Survey

144 456

192 618

Throw Rice

Not Throw Rice

Happy Ending

No Happy Ending

336 1074

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Is rice-throwing statistically independent from happy endings?

P(happy│throw rice) =? P(happy│no throw) =? P(happy)

.24 .24 .24

Conditional Probability

Joint Probability

• The probability of A, given B

• May be larger, smaller, or equal to the unconditional P(A)

• The probability that A and B both occur

• Use the multiplication rule

•Will always be ≤ to the unconditional P(A)

“Linda is thirty-one years old, single, outspoken, and very bright. She majored in philosophy. As a student, she was deeply concerned with issues of discrimination and social justice, and also participated in antinuclear demonstrations.”

•Linda is a bank teller

•Linda is a bank teller and is active in the feminist movement

Which is more likely?

Probability Rules

Probability of A or B: Addition Rule

P(A or B) = P(A) + P(B), when A and B are mutually exclusive

Probability of A and B: Multiplication Rule

P(A and B) = P(A) x P(B), when A and B are independent

The Addition Rule

A B“mutually exclusive” = A and B cannot both happen

P (A or B) = P(A) + P(B)

Patricia is getting paired up with a big sister from the neighboring high school.

If there are 30 student volunteers (9 seniors, 6 juniors, 7 sophomores, and 8 freshmen), what is the probability her big sister is an upperclassman?

P(senior or junior) = P(senior) + P(junior) = .30 + .20 = .50

The Multiplication Rule

A B“independent” = A does not effect the likelihood of B and vice versa

P (A and B) = P(A) X P(B)

The probability that Am Ex will offer Frank a job is 50%. The probability Citibank will offer him a job is 30%. Am Ex and Citibank are not in contact.

What is the likelihood he gets offered both jobs? What is the likelihood he is offered neither job?

P(AmEx and Citibank) = P(AmEx) x P(Citibank) = .50 x .30 = .15

P(Not AmEx and Not Citibank) = P(Not AmEx) x P(Not Citibank) = .50 x .70 = .35

General Addition Rule

A B

P (A or B) = P(A) + P(B) – P(A and B)

There are 20 people sitting in a café. 10 like tea, 10 like coffee, and 2 people like both tea and coffee. What is the probability that a random person in the café will like tea or coffee?

P(tea or coffee) = P(tea)+P(coffee)-P(tea and coffee) = .50+.50-.10 = .90

For all cases

When A and B are mutually exclusive, this is zero

General Multiplication Rule

P (A and B) = P(A) X P(B│A)

There are 10 green and 10 blue marbles in a jar. What is the probability that Sue draws two blue marbles in a row?

A B

P(blue1 and blue2)= P(blue1) x P(blue2│blue1) = 24.19

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For all cases

When A and B are independent, this is same as P(B)

Summary

Addition Rule

P(A or B) = P(A) + P(B), when A and B are mutually exclusive

P(A or B) = P(A) + P(B) – P(A and B), generally

Multiplication Rule

P(A and B) = P(A) x P(B), when A and B are independent

P(A and B) = P(A) x P(B│A), generally

Two possible outcomes- Heads or tails- Make basket or miss basket- Fatality, no fatality

With probability p (or 1-p)

Events are independent

Per trial probability is p (or 1-p)

Long run relative frequency is p (or 1-p)

Example: Binomial Random Processes

Short run relative frequency is NOT necessarily p

Example: Binomial Random Processes

H T H H T H T T H T H T T T H T H H

H T H H T H T T T T T H T H T H H

Chance is LUMPY

Example: Binomial Random Processes

People are bad random number generators, we put in too few “lumps” for our samples

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Conversely, people are too quick to draw conclusions of systematicity from observed “lumps” in a sequence

- A string of wins “must” mean a hot table

Example: Binomial Random Processes

“Representativeness Error”

“Law of Small Numbers” Error

- People expect a small sample to be too representative of of the population or the long run frequency

- People are overly confident of observed data patterns based on small samples

More representativeness errors: “The Gambler’s Fallacy”

Example: Binomial Random Processes

H H H H H H H H ?

People expect tails to be “temporarily advantaged” after a run of heads

But events are independent

H H H H H H H H H

H H H H H H H H T

equally likely

Example: Binomial Random Processes

equally likely (or unlikely)

to win

Which lotto ticket would you buy?

26 45 8 72 91

26 26 26 26 26 Less likely to be bought

• Each specific ticket is equally (un)likely to win

• A ticket that “looks like” ticket A (with alternating values) is more likely than one that “looks like” ticket B (with identical values).

•But buyer beware! You are betting on a specific ticket, not a general class of tickets

Predicting a specific versus a general pattern

• Probabilities for specific patterns get smaller as you run more trials

Example: Binomial Random Processes

What is the probability of getting heads on the second trial and the tails on all other trials?

P(T,H) = 0.25

P(T, H, T) = 0.125

P(T, H, T, T) = 0.0625

• Probabilities for general patterns get larger as you run more trials

Example: Binomial Random Processes

What is the probability of getting at least one heads when you toss a coin multiple times?

Two tosses: P(HT or TH or HH) = 0.75

Three tosses: P(HTT or THT or TTH or THH or HHT or HHH) = 0.875

Four tosses: 0.9375

• Probabilities for general patterns get larger as you run more trials

Example: Binomial Random Processes

Compare:

P(at least one accident) when you ride in a car 2x a week

P(at least one accident) when you ride in a car 7x a week

They say P (fatality in airplane crash) < P(fatality in car crash)

But people spend more time in cars

P(airplane fatality in one minute) = P(car fatality in one minute)

• The “hot hand” is a belief about conditional probability. People believe shots are not independent.

• Gilovich argues that the pattern of data, however, can be well described by a binomial random process

• His Evidence:

The “Hot Hand”

-Independent shots

-Two outcomes: basket or missed basket

-Player has general probability p of getting a basket

P(basket |miss) = P(basket|basket) = P(basket)

frequence of 4, 5, 6 basket “streaks” no more likely than a binomial process would predict

• Are people just deluded?

• There are biases in information processing which contribute to the misperception

• But also:

The “Hot Hand”

P(streak) is greater when p is greater.

Thus, by a binomial process, good players will have more streaks

P(streak) is greater when more shots are taken

players are not more likely to make the next shot if they made the previous shot, but…

turns out players are more likely to take the next shot if they made the previous shot.