What is The Poisson Distribution: Modeling Rare Events in Fixed Intervals?
Mathematical Foundation
Laws & Principles
- Three Requirements for Validity: (1) Events must be independent — one event does not affect the probability of another. (2) The average rate λ must be constant throughout the interval. (3) Two events cannot occur at exactly the same instant.
- Mean = Variance = λ: A unique property of the Poisson distribution is that its mean and variance are both equal to λ. If observed variance is much larger than the mean, the data is overdispersed and a Negative Binomial distribution is more appropriate.
- Poisson as Binomial Limit: When n is large and p is small (with np = λ), the Binomial distribution converges to the Poisson. This is the 'law of rare events' — 1,000 servers each with a 0.1% failure probability (λ = 1) follow Poisson.
Step-by-Step Example Walkthrough
" A call center receives an average of 4 calls per hour (λ = 4). What is the probability of receiving exactly 6 calls in one hour? "
- 1. Identify: λ = 4 calls/hour, k = 6.
- 2. Apply formula: P(X=6) = (4⁶ × e⁻⁴) / 6!
- 3. Compute: 4⁶ = 4,096. e⁻⁴ = 0.01832. 6! = 720.
- 4. P(X=6) = (4,096 × 0.01832) / 720 = 75.07 / 720 = 0.1042.