Bayes Theorem
"In its simplest algebraic form, Bayes' theorem is concerned with determining the conditional probability of event A given that event B. has occurred." (Kazmier, Staton & Fulks, 2003; p. 43). In this case, the event A is the increase in sales through the e-commerce site while event B. is the implementing of the decision to create a site. The probability for the sales to increase, according to the marketing team data analysis, is 54.2% and the probability for the site to be created is 58.6%. So, the probability for event B. To not happen is 41.4% and the possibility for sales to improve without the e-commerce site is 45.8%.
The general form of Bayes theorem is:
P (A
B) = P (A and B)/P (B).
P (A1B1)= P (A1 and B1 ) / P (B1 ) and P (A2B2) = P (A2 and B2) / P (B2).
When substituted, P (A1B1) is 0.5477 while P (A2B2) is 0.4523.
Based on this formula, the overall probability that the company will make good profits from the e-commerce site is 54.77% while the probability that the company will make profits without the e-commerce site is 45.23%. Using Bayes Theorem, the uncertainty was eliminated and the management has a good idea of the probability of making profits with or without the site. There is more than...
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