Question

a) Discuss, briefly, the three ways of measuring the probability of an event. [3 Marks]
b) Alhassan and Bawa are planning to form a partnership to build and operate a number of “car-wash bases” and that there Alhassan feels that there is a fifty-fifty chance that any new unit will show a profit for the first year. Bawa feels that the odds are 2 to 1. Due to Alhassan’s experience, he is three times as likely to be right as Bawa.
Suppose the partnership came into being and out of the six units opened, five of them showed a profit for the first year and the sixth showed a loss.
i) Calculate Alhassan’s and Bawa’s corresponding posterior probabilities. ii) How does the result in i) affect Alhassan and Bawa’s claim?

Answer 1