EXAMPLE 9.10 The Joint Distribution and the Two Marginal Distributions

The joint probability distribution gives a probability for each of the six cells in our table of “Flexibility” and “Competitive.” The marginal distribution for “Flexi-bilty” gives probabilities for adaptive, parallel, and preemptive, the three possible categories of flexibility. The marginal distribution for “Competitive” gives probabilities for medium and high, the two possible types of competitiveness.

Independence between “Flexibility” and “Competitive” implies that the joint distribution can be obtained by multiplying the appropriate terms from the two marginal distributions. For example, the probability that a company is adaptive (flexibility) and medium (competitive) is equal to the probability that it is adaptive (flexibility) times the probability it is medium (competitive). The hypothesis that “Flexibility” and “Competitive” are independent says that the multiplication rule applies to all outcomes.