tag:blogger.com,1999:blog-7294165939647321702.post592422327550660196..comments2020-02-12T00:39:41.576-05:00Comments on <center><a href="http://www.barelkarsan.com">Barel Karsan - Value Investing</a></center>: Overconfidence And AnchoringSaj Karsanhttp://www.blogger.com/profile/04493152766022812984noreply@blogger.comBlogger2125tag:blogger.com,1999:blog-7294165939647321702.post-1684964817359583252010-03-08T14:15:20.639-05:002010-03-08T14:15:20.639-05:00Hi luis,
tatimatla has graciously provided an elo...Hi luis,<br /><br />tatimatla has graciously provided an eloquent solution as follows:<br /><br />It's a wonderful illustration of the Baye's theorem. <br />Define two events A and B as: <br />A: Selecting a bag that's got predominantly black chips. <br />B: Drawing 12 chips and ending up with 8 black and 4 red chips. <br /><br />It's our job to find out P(A given B). <br />Now P(A given B) = P(A or B)/P(B) = P(B given A)*P(A)/P(B) <br /><br />We're left to find out the values of each of the individual probabilities that go into the above equation. <br /><br />The easiest first -> P(A) = 0.45 <br /><br />P(B given A) is nothing but landing with 8 "successes" (defined as the event where a black chip is obtained in the selection) with the probability of "success" being 0.7. <br />This equals 12C8 * 0.7^8 * 0.3^4 = 0.23114 <br /><br />P(B) = P(B given A)*P(A) + P(B given A')*P(A') = 0.23114*0.45 + [12C8* 0.3^8 * 0.7^4]*0.55 = 0.10832 <br /><br />Hence, P(A given B) = 0.45*0.23114/0.10832 = 96.04%Saj Karsanhttps://www.blogger.com/profile/04493152766022812984noreply@blogger.comtag:blogger.com,1999:blog-7294165939647321702.post-72035663916778306912010-03-05T19:31:44.568-05:002010-03-05T19:31:44.568-05:00I am trying to figure out how to calculate the ans...I am trying to figure out how to calculate the answer to the second part of question two - how do you reach the 96% probability?Unknownhttps://www.blogger.com/profile/03027221516975171518noreply@blogger.com