Original practice · fully worked
Original variant: repeated review with a deferred outcome
At each review, a request is approved with probability θ, deferred with probability 2θ, or rejected with the remaining probability. Reviews are independent, and a deferred request is reviewed again until it is approved or rejected. The probability that a request is eventually approved is 5/8. Calculate the probability that the initial review is deferred.
- A
1/6 - B
5/18 - C
3/8 - D
5/9 - E
5/8
Answer and calculation
Conditional on a review that ends the process, the approval probability is θ/(1−2θ). Equating this to 5/8 gives θ=5/18, so the initial deferral probability is 2θ=5/9, choice D.
Setup
Setup
Write the three one-review probabilities and isolate the outcomes that end the review process.
pA=θ,pD=2θ,pR=1−3θ pA+pR=1−2θ Model
Model
Deferrals only postpone the terminal decision. Conditional on a terminal review, approval therefore has probability θ divided by the total terminal probability.
Pr(eventual approval)=1−2θθ=85 Compute
Compute
Solve for θ, then double it to obtain the one-review deferral probability.
8θ=5(1−2θ)⟹θ=185 pD=2θ=95 Answer
Answer
The probability of a deferral on the initial review is 5/9.
95(D)