ECON-2006EG Study Guide - Quiz Guide: Sample Space, Mutual Exclusivity, Daniel Kahneman
7 Mar 2021
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Distinction between choice under risk and choice under uncertainty: Risk is when you know the possible outcomes and their probabilities, with which they occur. Uncertainty is when you know the possible outcomes but not their probabilities of occuring. This leads to several observations: the probability of no outcome occuring is equal to zero, the probability of an event must be between 0 and 1, pr(a) = 1 pr(ac) If two events are independent then it holds that. Independence tells us that the knowledge of wether a occurs should not affect our belief about wether. B occurs or vice versa e. g. consecutive coin tosses are independent as the outcome of the first coin toss does not affect the next! Pr(a b) = pr(a) + pr(b) pr(a b: pr(h1 h2) = + - = . Conditional probability e. g. probability of two consecutive landings on heads: pr(h) = ; pr(a b) = * = .
