Exercise

# Probability of losing money

In this exercise, we will use the DGP model to estimate probability.

As seen earlier, this company has the option of spending extra money, let's say $3000, to redesign the ad. This could potentially get them higher clickthrough and signup rates, but this is not guaranteed. We would like to know whether or not to spend this extra $3000 by calculating the probability of losing money. In other words, the probability that the revenue from the high-cost option minus the revenue from the low-cost option is lesser than the cost.

Once we have simulated revenue outcomes, we can ask a rich set of questions that might not have been accessible using traditional analytical methods.

This simple yet powerful framework forms the basis of Bayesian methods for getting probabilities.

Instructions

**100 XP**

- Initialize
`cost_diff`

, the difference between the 'high' and 'low' cost options, to`3000`

. - Get the revenue for the high-cost option and assign it to
`rev_high`

. - Calculate the fraction of times when
`rev_high - rev_low`

is less than`cost_diff`

. Call it`frac`

and use it to print your results.