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Extra resources for A Handbook of Statistics

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Using these pieces of information, we can make an assignment. If the components look good, we might make assign their success at 40%. S:{P(S)=40%; P(F)=60%} The last option to assign probabilities is through experimentation. That is, we perform the experiment multiple times and assign the probabilities based on the relative frequency of the simple event happening. Imagine if we did not know that each face of a die had an equal opportunity of coming up. If we needed to assign probabilities to each outcome, we could roll the die several times and see the frequency of the values.

Say for instance that we have an opportunity to invest in a start up business. We want to better understand the risks involved in investing our money so we decide to assign probabilities to the simple events of the experiment of the success of the business. Since we do not have any expertise in this type of probabilistic assignment, we can make a subjective assignment by looking at different pieces of information that we have about the business. For instance, how strong is senior management, what is the state of the economy, and have similar business succeeded or failed in the past.

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