There are 2 coins in a bin. When one of them is flipped, it lands on heads with probability .6, and when the other is flipped, it lands on heads with probability .3. One of these coins is to be randomly chosen and then flipped. Without knowing which coin is chosen, you can bet any amount up to $10, and you then either win that amount if the coin comes up heads or lose it if it comes up tails. Suppose, however, that an insider is willing to sell you, for an amount C, the information as to which coin was selected. What is your expected payoff if you buy this information? Note that if you buy it and then bet x, you will end up either winning x − C or − x − C (that is, losing x + C in the latter case). Also, for what values of C does it pay to purchase the information?
There are 2 coins in a bin. When one of them is flipped, it lands on heads with probability .6, and when the other is flipped, it lands on heads with probability .3. One of these coins is to be randomly chosen and then flipped. Without knowing which coin is chosen, you can bet any amount up to $10, and you then either win that amount if the coin comes up heads or lose it if it comes up tails. Suppose, however, that an insider is willing to sell you, for an amount C, the information as to which coin was selected. What is your expected payoff if you buy this information? Note that if you buy it and then bet x, you will end up either winning x − C or − x − C (that is, losing x + C in the latter case). Also, for what values of C does it pay to purchase the information?
Solution Summary: The author explains the expected payoff and the value of C required to purchase the information.
There are 2 coins in a bin. When one of them is flipped, it lands on heads with probability .6, and when the other is flipped, it lands on heads with probability .3. One of these coins is to be randomly chosen and then flipped. Without knowing which coin is chosen, you can bet any amount up to $10, and you then either win that amount if the coin comes up heads or lose it if it comes up tails. Suppose, however, that an insider is willing to sell you, for an amount C, the information as to which coin was selected. What is your expected payoff if you buy this information? Note that if you buy it and then bet x, you will end up either winning
x
−
C
or
−
x
−
C
(that is, losing
x
+
C
in the latter case). Also, for what values of C does it pay to purchase the information?
A mechatronic assembly is subjected to a final functional test. Suppose that defects occur at random in these
assemblies, and that defects occur according to a Poisson distribution with parameter >= 0.02.
(a) What is the probability that an assembly will have exactly one defect?
(b) What is the probability that an assembly will have one or more defects?
(c) Suppose that you improve the process so that the occurrence rate of defects is cut in half to λ = 0.01.
What effect does this have on the probability that an assembly will have one or more defects?
A random sample of 50 units is drawn from a production process every half hour. The fraction of non-conforming
product manufactured is 0.02. What is the probability that p < 0.04 if the fraction non-conforming really is
0.02?
A textbook has 500 pages on which typographical errors could occur. Suppose that there are exactly 10 such
errors randomly located on those pages. Find the probability that a random selection of 50 pages will contain
no errors. Find the probability that 50 randomly selected pages will contain at least two errors.
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, probability and related others by exploring similar questions and additional content below.
Discrete Distributions: Binomial, Poisson and Hypergeometric | Statistics for Data Science; Author: Dr. Bharatendra Rai;https://www.youtube.com/watch?v=lHhyy4JMigg;License: Standard Youtube License