Methods of Assigning Probabilities

1
Methods of Assigning Probabilities

• Classical Probability
• Empirical Probability and
• Subjective Probability

• P (A) N(A) / N
• P (X) ƒ (X) / n
• a measure of personal conviction that an event
  will occur

2
Classical Probability Assignment

• The Classical Probability Assignment is often
  associated with gambling and games of chance.
• P (A) N(A) / N
• where,
• N(A) Number of ways event A can occur
• N Total number of possible outcomes

3
Empirical Probability Assignment

• The Empirical or Relative Frequency Method of
  assigning probability uses past data that have
  been empirically observed. It notes the
  frequency with which some event has occurred in
  the past and estimates the probability of its
  reoccurrence on the basis of historic data.

4
Empirical Probability Assignment

• P (X) ƒ (X) / n
• Where,
• ƒ (X) Number of times event X has
  occurred in the past
• n Total number of observations

5
Subjective Probability Assignment

• A Subjective Probability Assignment is an
  individuals assessment of the likelihood of a
  particular outcome. The Subjective Probability
  Method is used when historic data are not
  available.