t

We have presented a logical step-by-step or linear procedure for solving Bayes' prob- lems. This procedure works very well for persons experienced in solving this type of prob- lem. The procedure can also help you to organize Bayes' problems. However, most real problem solving in new situations does not follow a step-by-step, or linear, procedure. Thus, you are likely to move back to previous steps and revise your initial definitions. In some cases you may find it useful to write out Bayes' theorem before you define the prob- abilities. The mathematical form defines the probabilities that must be obtained from the problem description. Alternatively, you may want to construct a two-way table, as we did in Example 3.23. As you are learning to solve these problems, use the structure, but learn to be creative and willing to go back to previous steps. bility t5 Example 3.25 Market Research (Bayes' Throrem) Blue Star United, a major electronics distributor, has hired Southwest Forecasters, a market research firm, to predict the level of demand for its new product that combines cell phone and complete Internet capabilities at a price substantially below its major competitors. As part of its deliverables, Southwest provides a rating of Poor, Fair, or Good, on the basis of its research. Prior to engaging Southwest Blue Star, management concluded the following probabilities for the market-demand levels: P(Low)=P(S) = 0.1 PModerate) = P(52) = 0.5 P High) = P(53) = 0.4 Southwest completes its study and concludes that the market potential for this product is poor. What conclusion should Blue Star reach based on the market-study results