Probability Distributions

Frequency Distributions: is obtained by listing all possible outcomes of an experiment

and then indicating the observed frequency of occurrences of each of these outcomes.

Probability Distributions: can be thought of as a theoretical frequency distribution that

describes how outcomes are expected to vary.

The basic difference between the two is that while in a F D , an experiment has actually
been performed to get a listing of the frequencies of all possible outcomes, a P D is a
listing of probabilities of all the possible outcomes that could result if the experiment
were done.

If we are talking about the P D of a particular variable, what we mean is a list of distinct
numerical values of the variable along with their associated probabilities.

If we are talking about a three toss experiment and the variable x that we are interested
in is the no. of heads, then the P D is as given below.

x 0 1 2 3

p 1/8 3/8 3/8 1/8

Random Variable is one that takes different values in as a result of the outcomes of a
random experiment. A ll the values that a random variable can take are equally likely
and are known only after the conduct of the experiment.

A Discrete Random Variable is a random variable that can take only a limited no of
values ( no of heads , people, defects etc)while A Continuous Random Variable is
one that can take any value within a range(price of an item, height/weight of students in
a class etc).

Probability Distributions are termed as discrete or continuous depending on the variable

that they describe. So, a P D listing out the probabilities of occurrence of a discrete
variable like say, the no of defects in a batch, is a discrete distribution while one listing
out the probabilities of occurrence of a continuous variable like say, the time taken by a
mechanic to repair a machine, is a continuous distribution.

Expected Value of a random variable is the value that one would expect it to take. For
example, one would expect to get 10 heads in 20 tosses. If one were to get 18 heads in
20 tosses, the fairness of the coin in use could be questioned.
To get the expected value of a discrete random variable, given its P D, we just get the
value of p1x1+p2x2+…..
Concepts of Expected Values play a very vital role in managerial decision making.
 Binomial Distribution

A discrete distribution very widely used.

Conditions to be satisfied:
1. Each observation can be defined only in 2 ways, say, either a success or failure.
2. Probability of success or failure remains the same during the time of the experiment
for every trial, for a specific no of trials.
3. The two possible outcomes are independent of each other.

Bernoulli Process: A process that satisfies all the above conditions.

Tossing of a fair coin a fixed no of times, success or failures of aspirants in an interview
etc. are examples. Each Bernoulli Process has its own characteristic probability, has
only two possible outcomes and the outcome in one trial has no effect on the other.

A Two toss example:

Let probability of getting a head be ‘p’ and probability of getting a tail be ‘q’; then
p = (1-q)

P( 2H ) = p2 ;

P(1H,1T ) = pq + qp ;

P( 2T) = q2

If we call getting a head as a success and getting q as a failure,

Then the expansion of (q +p)n gives the various terms of the B D.

In general, probability of ‘r’ successes in ‘n’ trials, where ‘p’ and ‘q’ are the
probabilities of success and failure respectively is given by

n
P(r) = Cr pr q(n-r)
Where ‘n’ is large, then calculations become very tedious and hence we can resort to
the use of binomial tables.

Mean and Standard Deviation of a binomial distribution are

Mean = µ = n p; St. Dev. = σ = √ n p q; Variance = σ2 = n p q

Fitting a binomial distribution to a given data:

1. Find p and q.
n
2. Expand ( p + q ) , where ‘n’ is the no of possible outcomes,
3. Multiply each of the terms by ‘N’ (no of trials) to get the frequency distribution.
Limitations of Binomial Distributions:
We have to be careful in deciding whether a particular set of data can be approximated
by a binomial distribution, as both conditions 2 and 3 mentioned earlier have to be met.
Compliance of these two conditions is quite difficult. Still, there are many situations
where use of B D is prevalent.

Poisson Distribution

A discrete distribution again widely used.

Poisson Process:
Average no of defectives in a batch, No of vehicles arriving at a check post in a specific
interval of time, No of calls received by a telephone operator, No of accidents in an
intersection etc., are examples of a Poisson Process.

Characteristics:
1. The events occur independently; i.e., the occurrence of a subsequent event is not at
all influenced by the occurrence of an earlier event.

2. Theoretically there is no limit on the no of occurrences of an event during a specified

period.

3. The probability of a single occurrence of an event is proportional to the length of the

time period.

4. In an extremely small portion of the time period, the probability of two or more
occurrences of an event is negligible.

Poisson Probabilities:
If λ is the average no of arrivals of vehicles, in a specified time, at a check point,
and if the arrivals follow a Poisson distribution, then the probability that there
will be exactly x arrivals in the next period ( of specified time ), is given by

P(x) = [ λ x x e –λ ] ÷x!
There are tables for getting values of ex as well as the Poisson probabilities directly once
λ is defined and hence tedious calculations can be avoided.

Mean of Poisson Distribution is λ which is also its variance.

Fitting a Poisson Distribution to a given data.

1. Find the mean of the given distribution as λ.
2. Find P(X) for various values of the random variable from the tables.
3. Find the frequency of occurrence of each event by multiplying P(X) by N.
 4. Compare with given data to check the goodness of fit.
Poisson as an approximation to Binomial:
The calculations involved in the B D are quite tedious as compared to P D. Also, the
binomial tables are not available for the entire range of data that one may encounter.
In such cases it is possible to approximate a P D for a B D provided:

p < 0.05 and n > 20.

In such cases we can substitute ‘np’ for λ and proceed as before.