Class probability: Difference between revisions
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[[Class probability]], also referred to as frequency probability, is is a form of probability analysis used for events or phenomena which are members of larger homogeneous classes. When dealing with such classes it is assumed that the behavior of the entire class is | [[Class probability]], also referred to as frequency [[probability]], is is a form of probability analysis used for events or phenomena which are members of larger homogeneous classes. When dealing with such classes it is assumed that the behavior of the entire class is known but one is ignorant of the behavior of individuals in the class.<ref>[[Ludwig von Mises]]. [http://mises.org/resources/3250 "Human Action"], 2010, page 107.</ref> An example of class probability applies to calculating the premiums for fire insurance. While an insurance company will not know which specific house in a neighborhood will burn down, they will know the rate or frequency of fires from similar groups of houses in the past and can thus estimate the probability of fire for that class, i.e., neighborhood.<ref>[[Peter Klein]]. [http://mises.org/resources/3250 "The Capitalist and the Entrepreneur: Essays on Organizations and Markets"], 2010, page 118.</ref> Class probability can be contrasted to [[case probability]] which deals with unique events which cannot be grouped into larger classes. | ||
{{See also|Probability}} | |||
==References== | ==References== | ||
Latest revision as of 16:21, 4 May 2012
Class probability, also referred to as frequency probability, is is a form of probability analysis used for events or phenomena which are members of larger homogeneous classes. When dealing with such classes it is assumed that the behavior of the entire class is known but one is ignorant of the behavior of individuals in the class.[1] An example of class probability applies to calculating the premiums for fire insurance. While an insurance company will not know which specific house in a neighborhood will burn down, they will know the rate or frequency of fires from similar groups of houses in the past and can thus estimate the probability of fire for that class, i.e., neighborhood.[2] Class probability can be contrasted to case probability which deals with unique events which cannot be grouped into larger classes.
References
- ↑ Ludwig von Mises. "Human Action", 2010, page 107.
- ↑ Peter Klein. "The Capitalist and the Entrepreneur: Essays on Organizations and Markets", 2010, page 118.