The formula of Exercise 3.52 is often used to determine subjective probabilities. For instance, if an applicant for a job “feels” that the odds are 7 to 4 of getting the job, the subjective probability the applicant assigns to getting the job is

a) If a businessperson feels that the odds are 3 to 2 that a new venture will succeed (say, by betting \($300\) against \($200\) that it will succeed), what subjective probability is he or she assigning to its success?

(b) If a student is willing to bet \($30\) against \($10,\) but not \($40\) against \($10,\) that he or she will get a passing grade in a certain course, what does this tell us about the subjective probability the student assigns to getting a passing grade in the course?

Data From Exercise 3.52

Data From Exercise 3.51

Transcribed Image Text:

7 7 P = 7+4 11