Binomial Distribution – Understanding Why Poisson Distribution is the Limiting Case of Binomial Distribution

binomial distributioncombinatoricsintuitionpoisson distributionprobability-calculus

In "Data Analysis" by D. S. Sivia, there is a derivation of the Poisson distribution, from the binomial distribution.

They argue that the Poisson distribution is the limiting case of the binomial distribution when $M\rightarrow\infty$, where $M$ is the number of trials.

Question 1: How can that argument intuitively be understood?

Question 2: Why is the large-$M$ limit of $\frac{M!}{N!(M-N)!}$ equal to $\frac{M^{N}}{N!}$, where $N$ is the number of successes in $M$ trials? (This step is used in the derivation.)

Best Answer

I will try a simple intuitive explanation. Record that for a binomial random variable $X \sim \text{Bin}(n,p)$ we have expectation is $n p$ and variance is $n p (1-p)$. Now think that $X$ records the number of events in a very large number $n$ of trials, each with a very small probability $p$, such that we are very close to $1-p=1$ (really $\approx$). Then we have $np=\lambda$ say, and $n p (1-p) \approx n p 1 =\lambda$, so the mean and variance are both equal to $\lambda$. Then remember that for a poisson distributed random variable, we always have mean and variance equal! That is at least a plausibility argument for the poisson approximation, but not a proof.

Then look at it from another viewpoint, the poisson point process https://en.wikipedia.org/wiki/Poisson_point_process on the real line. This is the distribution of random points on the line that we gets if random points occur according to the rules:

  1. points in disjoint intervals are independent
  2. probability of a random point in a very short interval is proportional to length of interval
  3. probability of two or more points in a very short interval is essentially zero.

Then the distribution of number of points in a given interval (not necessarily short) is Poisson (with parameter $\lambda$ proportional to length). Now, if we divide this interval in very many, equally very short subintervals ($n$), the probability of two or more points in a given subinterval is essentially zero, so that number will have, to a very good approximation, a bernolli distribution, that is, $\text{Bin}(1,p)$, so the sum of all this will be $\text{Bin}(n,p)$, so a good approximation of the poisson distribution of number of points in that (long) interval.

Edit from @Ytsen de Boer (OP): question number 2 is satisfactorily answered by @Ɓukasz Grad.

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