Essentials of Business Analytics 1st Edition by Jeffrey Camm,James Cochran,Michael Fry,Jeffrey Ohlmann ,David Anderson

Exercise 22

Suppose that you are given a decision situation with three possible states of nature: s 1 , s 2 , and s 3. The prior probabilities are P ( s 1 ) = 0.2, P ( s 2 ) = 0.5, and P ( s 3 ) = 0.3. With sample information I , P ( I | s 1 ) = 0.1, P ( I | s 2 ) = 0.05, and P ( I = s 3 ) = 0.2. Compute the revised (or posterior) probabilities: P ( s 1 | I ), P ( s 2 | I ), and P ( s 3 | I ).