UDM713: DECISION MAKING METHODS AND ANALYSIS AP771: MSC OF URBAN DEVELOPMENT AND MANAGEMENT

Decision Making Method through

Prepared by:
Anwar Bin Suran | 2012977513

PROBABILITY TECHNIQUES IN DECISION MAKING ANWAR BIN SURAN: 2012977513 9th MEI 2013
UDM713: DECISION MAKING METHODS AND ANALYSIS AP771: MSC OF URBAN DEVELOPMENT AND MANAGEMENT
History of Probability Theory

The mathematical theory of probability has its

roots in attempts to analyze games of chance
by Gerolamo Cardano in the sixteenth century,
and by Pierre de Fermat and Blaise Pascal in
the seventeenth century (for example the
"problem of points"). Christiaan Huygens
published a book on the subject in 1657.

What is Probability Theory?

Probability theory is the branch of mathematics concerned with analysis of random phenomena and the chance of an event occurring.
Most of us are familiar with probability from playing or observing games of chance such as cards game, jackpot or lotteries.
Probability theory is used in various fields for decision making such as investment insurance and weather forecasting.

PROBABILITY TECHNIQUES IN DECISION MAKING ANWAR BIN SURAN: 2012977513 9th MEI 2013
UDM713: DECISION MAKING METHODS AND ANALYSIS AP771: MSC OF URBAN DEVELOPMENT AND MANAGEMENT
The Concept of Probability Technique

Sample Space: (S) List of

Set
all possible outcomes of the
experiment (example dice) Sample space of the dice - S: (1,2,3,4,5,6) = 6

Event: (A) is a collection

Subset

or one or more outcomes

from a sample space
Incident to get an event numbers - A: (2,4,6) = 3
Incident to get an odd numbers - A: (1,3,5) = 3
Example:
Basic Laws of Probability: The chances of rolling a odd numbers with a die
h

P(A) = n(A)/n(S) Number that can happen: 3 (there is only 3 face with a odd numbers)
Total number of outcomes: 6 (there are 6 faces all together)

P(A) : Event that will occur P(A) = n(A)/n(S)

n(A) : number of possible outcome in A If E is the event of getting 4, then n(E) = 1
n(S) : Total number of outcomes in sample space, S P(E) = 1/6
PROBABILITY TECHNIQUES IN DECISION MAKING ANWAR BIN SURAN: 2012977513 9th MEI 2013
UDM713: DECISION MAKING METHODS AND ANALYSIS AP771: MSC OF URBAN DEVELOPMENT AND MANAGEMENT
The Derivative Formula of Probability The result

Explanations:
P(A) means "Probability Of Event A“
Multiply it! P(A) = 2/5
If we got a Blue Marble first the chance is now 1/4
If we got a Red Marble first the chance is now 2/4
P(B|A) means "Event B given Event A"
Event: (A)
P(B|A) = 1/4
Event: (B) Probability

The Derivative Formula of Probability

"Probability of event A and event B equals, the probability of

event A times the probability of event B given event A"

PROBABILITY TECHNIQUES IN DECISION MAKING ANWAR BIN SURAN: 2012977513 9th MEI 2013
UDM713: DECISION MAKING METHODS AND ANALYSIS AP771: MSC OF URBAN DEVELOPMENT AND MANAGEMENT

The Concept of Probability Tree Diagram (Independent Event) HowEvents

do youcan be "Independent",
calculate the overall meaning
probabilities?
Calculating probabilities can be hard, sometimes you add them, sometimes each event is not affected by any
You multiply probabilities along the branches
you multiply them, and often it is hard to figure out what to do... other events
You add probabilities down columns

So, tree diagrams to the rescue!

Here is a tree diagram for the toss of a coin:

There are two "branches" (Heads and Tails)

The probability of each branch is written on the branch

The outcome is written at the end of the branch
Now we can see such things as:

The probability of "Head, Head" is 0.5×0.5 = 0.25

We can extend the tree diagram to two tosses of a coin: All probabilities add to 1.0 (which is always a good check)
The probability of getting at least one Head from two tosses
is 0.25+0.25+0.25 = 0.75
... and more

That was a simple example using independent events (each toss of a coin is
independent of the previous toss), but tree diagrams are really wonderful for figuring
out dependent events (where an event depends on what happens in the previous
event) like for the next example:

PROBABILITY TECHNIQUES IN DECISION MAKING ANWAR BIN SURAN: 2012977513 9th MEI 2013
UDM713: DECISION MAKING METHODS AND ANALYSIS AP771: MSC OF URBAN DEVELOPMENT AND MANAGEMENT
The tree diagram is complete, now let's calculate the all of probabilities.
The Concept of Probability Tree Diagram (Dependent Event)
It’s done by multiplying each probability along the branches of the tree.
Events can also be "dependent" which means they can be affected by previous events Here is how to do it for the "Sam, Yes" branch:
Example:
You are off to soccer, and love being the Goalkeeper, but that depends who is the Coach today:

with Coach Sam the probability of being Goalkeeper is 0.5

with Coach Alex the probability of being Goalkeeper is 0.3
Sam is Coach more often ... about 6 out of every 10 games (a probability of 0.6).

So, what is the probability you will be a Goalkeeper today? (When we take the 0.6 chance of Sam being coach and include the 0.5
chance that Sam will let you be Goalkeeper we end up with an 0.3
Let's build a tree diagram. First we chance.)
show the two possible coaches: Sam But we are not done yet! We haven't included Alex as Coach:
and Alex:
The probability of getting Sam is 0.6, so the probability
of Alex must be 0.4 (together the probability is 1)
jh
Now, if you get Sam, there is 0.5 probability of being
Goalie (and 0.5 of not being Goalie):

An 0.4 chance of Alex as Coach, followed by an 0.3 chance gives

0.12 and now we add the column:
If you get Alex, there is 0.3 probability of 0.3 + 0.12 = 0.42 probability of being a
being Goalie (and 0.7 not): Goalkeeper today!

PROBABILITY TECHNIQUES IN DECISION MAKING ANWAR BIN SURAN: 2012977513 9th MEI 2013
UDM713: DECISION MAKING METHODS AND ANALYSIS AP771: MSC OF URBAN DEVELOPMENT AND MANAGEMENT

The Example of Probability Technique Answer (a)

0.9 Pass
Question Pass Fail
0.9 0.1
The workers in a factory need to attend a competency course and pass three Pass 0.3 Pass
tests. The probability of passing the first test is 0.8 and if a worker passes a 0.8
test, the probability that the worker will pass the subsequent test is 0.9. On 0.1 Fail 0.7 Fail
the other hand, if the worker fails, the probability that the worker will fail 0.9 Pass
the subsequent test is 0.7. Pass
0.3
a) Construct a tree diagram for the event above 0.1 Fail
0.2 Fail
b) Find the probability that a worker will pass the first and the third test Pass
0.3
c) Find the probability that a worker will pass at least two test 0.7 Fail
0.7 Fail
Answer (b)
P (pass the first and the third test) First Test Second Test Third Test

= (0.8)(0.9)(0.9) + (0.8)(0.1)(0.3) Answer (c)

= 0.648 + 0.024
P (pass the first and the third test)
= 0.672
= (0.8)(0.9)(0.9) + (0.8)(0.1)(0.3) +
(0.2)(0.3)(0.9) + (0.8)(0.9)(0.1)
= 0.648 + 0.024 + 0.54 + 0.072
= 0.798

PROBABILITY TECHNIQUES IN DECISION MAKING ANWAR BIN SURAN: 2012977513 9th MEI 2013
UDM713: DECISION MAKING METHODS AND ANALYSIS AP771: MSC OF URBAN DEVELOPMENT AND MANAGEMENT

Strength and Assumption of Probability The process allows business professionals You can report information more
to look at a problem objectively, concisely and consistently. This helps
Like other theories, the theory of probability is a
removing personal opinions. you and your company make better
representation of probabilistic concepts in formal terms—that
is, in terms that can be considered separately from their and more reliable decisions.
meaning. These formal terms are manipulated by the rules of
mathematics and logic, and any results are interpreted or
translated back into the problem domain.

Using probability concepts in decision-making

typically involves analyzing statistical data and
models developed by experts. More graphically

Additionally, you can compare your results to an industry standard or

By assigning the likelihood of the occurrence of
a competitor’s results. For example, you can indicate on a product
an event, you can make better-informed decisions.
specification data sheet for a computer storage product that you have
Using a classical approach, you assume all
a target of a 1 in 1020 probability of uncorrectable data. That makes
possibilities are equally likely and that what has
your product seem very reliable and desirable for purchase.
happened in the past will occur in the future.

PROBABILITY TECHNIQUES IN DECISION MAKING ANWAR BIN SURAN: 2012977513 9th MEI 2013
UDM713: DECISION MAKING METHODS AND ANALYSIS AP771: MSC OF URBAN DEVELOPMENT AND MANAGEMENT

PROBABILITY TECHNIQUES IN DECISION MAKING ANWAR BIN SURAN: 2012977513 9th MEI 2013