A Priori Probability

A priori probability is calculated by logically examining a circumstance or existing information regarding a situation. It usually deals with independent events where the likelihood of a given event occurring is in no way influenced by previous events. An example of this would be a coin toss. The largest drawback to this method of defining probabilities is that it can only be applied to a finite set of events as most events are subject to conditional probability to at least a small degree.

A priori probabilities are most often used within the deduction method of calculating probability. This is because you must use logic to determine the possible outcomes of an event in order to determine the number of ways these outcomes can occur.

For example, consider flipping a coin. A fair coin has two different sides and each time you flip it has an equal chance of landing on either side, regardless of the previous toss' outcome. The a priori probability of landing on the "heads" side of the coin is 50%. Another example is how the price of a share can change. Its price can increase, decrease or remain the same. Therefore, according to a priori probability, we can assume that there is a 1-in-3, or 33%, chance of one of the outcomes occurring (all else remaining equal).