Assignment 1 Quantitative Management

BAYERS’ THEOREM & CONDITIONAL PROBABILITY

Question: A Black Box is a device designed to survive in the case of a crash. It is used to store all
the data prior to the crash. And this data is used to determine the reason of the crash. But in some
cases, it may not be able to withstand crash. It is can be considered as a defective product or maybe
it fails due to high intensity, which surpasses it’s designed limit. For generalization lets take it as
defective.
The A Manufacturing Company makes 60% of the Black Box, the B Company makes 25% of
them, and the C Company makes the other 15%. The Black Boxes made by A have a 2% rate of
defects, the Bryant Black Box have a 1% rate of defects, and the C Black Box have a 5% rate of
defects, it helps to explain why C has the lowest market share.

a. If a Black Box is randomly selected from the general population of all Black Boxes, find the
probability that it was made by the A Manufacturing Company.

b. If a randomly selected Black Box is then tested and is found to be defective, find the
probability that it was made by the B Manufacturing Company.

Answer:

Company A Company B Company C

Product Share 60% 25% 15%

Defects 2% 1% 5%

P(A) = 0.60 Probability of A

P(D|A) = 0.02 Probability of given A are defects
P(B) = 0.25 Probability of B
P(D|B) = 0.01 Probability of given B are defects
P(C) = 0.15 Probability of C
P(D|C) = 0.05 Probability of given C are defects
A. Probability of Black Box is from Company A = Product share of Company A in the market
P(A) = 0.60

B. Probability of defective is from B = Probability of B * Probability of B and are defects

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Probability of Defective
P(B|D) = P(B)*P(D|B) / P(D)

= P(B)*P(D|B) / {P(D|A) + P(B)*P(D|B) + P(C)*P(D|C)}

= 0.25*0.1/(0.6*0.02+0.25*0.01+0.15*0.05)
= 0.1136

Probability Tree

P(A) = 0.60 P(B) = 0.60 P(C) = 0.60

P(D|A) = 0.02 P(D|B) = 0.01 P(D|C) = 0.05

P(D) = P(A)*P(D|A) + P(B)*P(D|B) + P(C)*P(D|C)