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Analyze a sample problem: Kahneman’s Cabs

Analyze a sample problem: Kahneman’s Cabs - Microsoft Excel Tutorial

From the course: Learning Excel: Data Analysis

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Analyze a sample problem: Kahneman’s Cabs

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- [Instructor] If you haven't worked with Bayesian analysis before dealing with prior probabilities and base rates, then the concept can be a little unclear. I'd like to work through a classic example from Tversky and Kahneman called it the taxicab problem that will demonstrate how Bayesian analysis works and give you better intuition. Let's start with the facts as proposed within the problem, A cab was involved in a hit-and-run accident at night. There are two cab companies working in the city, green and blue. Furthermore, we know that a witness identified the cab as blue. However, 85% of the cabs in the city are green and only 15% are blue. Next, we need to know about witness reliability. The court tested the reliability of the witness under the circumstances that existed on the night of the accident, and concluded that the witness correctly identified each one of the two colors 80% of the time and failed 20% of the time. If there are any attorneys watching this video, don't worry…

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