Class summary: Monday, 3/17

I introduced another important method for computing expectations, the so-called indicator method, and worked several examples illustrating the use of this method: (i) the expectation of the binomial(n,p) distribution; (ii) the expected number of red balls in a sample of n balls taken out of R red and B black balls, without replacement (this is the standard box/ball problem that came up in connection with combinatorial probabilities); and (iii) the expected number of distinct birthdays in the birthday problem. The key to applying this method is to identify events Ai such that the r.v. X is equal to the number of Ai's occurring.

Reading Guide to the Pitman Text: Sections 3.1 and 3.2

3.1 Random variables: Introduction

A random variable is an important concept in probability theory. This section provides an excellent introduction to, and motivation of, this abstract concept, and you should carefully study this section (except for those parts that have been explicitly skipped). The examples in this section complement well the examples I worked in class, and they serve as models for some of the homework problems.

3.2 Expectation

The expectation E(X) is a numerical quantity associated with a r.v. X, defined by the formula on p.163, which represents an average of all values of the r.v., weighted by the probabilities with which these values are taken on. The expectation of a r.v. behaves much like an integral of a function. An important interpretation/application of the expectation is as the "fair value" or "break-even price" of a game of chance. The expectation can be computed (i) via the definition, (ii) indirectly using rules of expectations, and (iii) by the indicator method. Which method one should use is usually dictated by the context.

The presentation of expectation in the text is excellent, and you should read all of Section 3.2, except for the following parts:

Be sure to study the formula summary on p. 181 and memorize those formulas; this summary complements the end-of-chapter summary on p. 248 - 249.


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