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Markov Process Updated

Markov process involves using probability transition matrices to predict future trends or outcomes based on current probabilities of transitions between events. The probabilities represent the likelihood of one event following another. Applying these transition probabilities through matrix multiplication provides forecasts of future states. The process is repeated until values stabilize. Markov processes can model situations where sequential events influence future probabilities, like brand switching between products. Analysis begins by observing current activity, collecting data on transition probabilities, and calculating expected future states based on these probabilities.

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Timilehin Ogundare
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33 views3 pages

Markov Process Updated

Markov process involves using probability transition matrices to predict future trends or outcomes based on current probabilities of transitions between events. The probabilities represent the likelihood of one event following another. Applying these transition probabilities through matrix multiplication provides forecasts of future states. The process is repeated until values stabilize. Markov processes can model situations where sequential events influence future probabilities, like brand switching between products. Analysis begins by observing current activity, collecting data on transition probabilities, and calculating expected future states based on these probabilities.

Uploaded by

Timilehin Ogundare
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
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MARKOV PROCESS

Markov Process involves predicting the courses of actions or trends using probability transition
matrices (PTMs). PTMs are matrices in which the individual elements are in the form of
probabilities e.g 0.5, 0.7, 0.65 etc.

The probabilities represent the probability of one event following another event, i.e. the
probability of the transition from one event to the next.

The probabilities of the various changes applied to the initial state by matrix multiplications give
a forecast of the succeeding state. This process can be repeated indefinitely but usually it will be
found that after several cycles the values will stabilize within a restricted range

Markov process occur in areas such as marketing which allows for brand switching or some
other problems where one event succeeds another and the transition probability are known.

The transitioning process will normally begin with activity observations and process monitoring.
This is then complemented with data collection from which transitioning probabilities can be
calculated.

Example 1
Two products Close-up and Maclean, currently share the market with shares of 60% and 40%
respectively. Each week some brand switching takes place. Of those who bought Close-up the
previous week, 70% buy it again whilst 30% switch to Maclean. Of those who bought Maclean
the previous week, 80% buy it again whilst 20% switch to Close-up.
Required:
What is the expected market share for each product at the long run?

Example 2

MARIA Local Government Council runs a bus service and a city cabs service. Presently the working
population of the local council without personal cars are estimated at 50,000. This army of commuters
use the two transport systems provided by the local government. The authorities want to invest more
on the system that is likely to command more commuters in the future and has asked you for help. They
estimated that of those who made use of the bus service the previous month 18% of them want to
make use of the cab services, while 22% of those who made use of the cab services wants to try the bus
service. Currently, the two services share the commuters on a 45% to 55% basis for the bus and car
respectively.

Required

1. What will be the market share of the two services in 3 months time? (5 marks)
2. Compute the equilibrium market share for the bus and cab services. Give your answer in:

a. Percentage; (2 marks)
b. Number of commuters. (3 marks)

3. If a cab and a bus can carry a maximum of 5 and 50 passengers per trip respectively and
all the commuters move at the same time during rush hours, how many cars and buses
will be required to satisfy the commuter needs of Maria local government after the
equilibrium is reached? (5 marks)

(15 marks)

PRACTICE QUESTION
1. Markov process is also known as ……… (a) matrix algebra (b) matrix prediction (c) transitional
mathematics (d) probability transition matrix.
2. If the current market share for X and Y is 55% and 45% respectively; what is the next season’s
market share for both if X and Y take 20% of each other’s market share (a) 60% and 40% (b) 53%
and 47% (c) 49% and 51% (d) 51% and 49%
3. ___________ involves predicting the courses of actions or trends using probability transition
matrices (PTMs).

Question 1
ORELOPE Local Government Council runs a bus service and a city cabs service. Presently the working
population of the local council without personal cars are estimated at 60,000. This army of commuters
use the two transport systems provided by the local government. The authorities want to invest more
on the system that is likely to command more commuters in the future and has asked you for help. They
estimated that of those who made use of the bus service the previous month 18% of them want to
make use of the cab services, while 22% of those who made use of the cab services wants to try the bus
service. Currently, the two services share the commuters on a 45% to 55% basis for the bus and car
respectively.

Required

4. What will be the market share of the two services in 3 months’ time? (5 marks)
5. Compute the equilibrium market share for the bus and cab services. Give your answer in:
c. Percentage; (2 marks)
d. Number of commuters. (3 marks)

6. If a cab and a bus can carry a maximum of 6 and 20 passengers per trip respectively and
all the commuters move at the same time during rush hours, how many cars and buses
will be required to satisfy the commuter needs of Orelope local government after the
equilibrium is reached? (5 marks)

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