Applications of the Poisson distribution to the business world

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Abstract

Discovered nearly two hundred years ago, the Poisson distribution remains the basis for the calculation of the probability of rare events and for events that occur at random times. Throughout the statistical literature there are numerous instances where the corresponding Poisson formula has been used to investigate various occurrences and these are well documented in the introduction. Of particular interest in this paper is the application of the Poisson distribution to any business that loans out its goods and services to customers whose number in any one time period are impossible to predict. By an appropriate use of the Poisson formula, it is demonstrated how to calculate the chance that customers will be lost by not having enough items to loan out, the extra number of items that could be serviced by purchasing another item for loan and the expected length of time before the cost of purchasing a new item could be made up from the extra revenue. These are all essential questions for a business that wants to maximise its return. A specific example of how the Poisson distribution was used in a court case is also provided.
Original languageEnglish
Pages (from-to)114-119
Number of pages6
JournalInternational journal of business research
Volume9
Issue number6
Publication statusPublished - 2009

Keywords

  • Poisson
  • probablitiy

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