PROBABILITY AND STATISTICS

CASE PROBLEM

PROBLEM

Two law firms in a community handle all the cases dealing with consumer suits against
companies in the area. The Abercrombie firm takes 40% of all suits, and the Olson firm handles
the other 60%. The Abercrombie firm wins 70% of its cases, and the Olson firm wins 60% of its
cases.

a. Develop a probability tree showing all marginal, conditional, and joint probabilities.

b. Develop a joint probability table.

Outcome Marginal
Firm
Win Lose Probabilities
Abercrombie 0.28 0.12 0.40
Olson 0.36 0.24 0.60
Marginal
0.64 0.36 1.00
Probabilities

c. Using Bayes ‘rule, determine the probability that the Olson firm handled a particular
case, given that the case was won.

P ( W |O ) P ( O ) (0.60)(0.60) 0.36
P ( O|W )= P ( O|W )= P ( O|W )=
P (W |O ) P ( O ) + P (W |A ) P ( A ) ( 0.60)(0.60)+(0.70)(0.40) 0.36+0.28
P ( O|W )=0.5625