Quantitative Analysis for Management, 13/e

2.2 Revising Probabilities with Bayes’ Theorem

Bayes’ Theorem is used to incorporate additional information as it is made available and help create revised or posterior probabilities from the original or prior probabilities. This means that we can take new or recent data and then revise and improve upon our old probability estimates for an event (see Figure 2.3). Let us consider the following example.

Figure 2.3 Using Bayes’ Process

Figure 2.3 Full Alternative Text

A cup contains two dice identical in appearance. One, however, is fair (unbiased) and the other is loaded (biased). The probability of rolling a 3 on the fair die is $1^{}{/}_6\text{,}$ or 0.166. ...