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.

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.

Take Hint (-30 XP)

Exercise

Probability of losing money

Instructions