Anderson Sweeney Williams: Quantitative Methods For Business 8E
Anderson Sweeney Williams: Quantitative Methods For Business 8E
QUANTITATIVE
METHODS FOR
BUSINESS 8e
Transition Probabilities
Steady-State Probabilities
Absorbing States
Transition Matrix with Submatrices
Fundamental Matrix
Slide 2
Markov Processes
Slide 3
Transition Probabilities
Slide 5
Absorbing States
Slide 6
Transition Matrix with Submatrices
R Q
Slide 7
Transition Matrix with Submatrices
Slide 8
Fundamental and NR Matrices
Slide 9
Example: North’s Hardware
Slide 10
Example: North’s Hardware
Transition Matrix
Slide 11
Example: North’s Hardware
Steady-State Probabilities
• Question
How many times per year can Henry expect to
talk to Shirley?
• Answer
To find the expected number of accepted calls per
year, find the long-run proportion (probability) of
a call being accepted and multiply it by 52 weeks.
. . . continued
Slide 12
Example: North’s Hardware
Steady-State Probabilities
• Answer (continued)
Let 1 = long run proportion of refused calls
2 = long run proportion of accepted calls
Then,
.35 .65
[ ] = [ ]
.20 .80
Slide 13
Example: North’s Hardware
Steady-State Probabilities
• Answer (continued)
Thus, + = (1)
+ = (2)
and, + = 1 (3)
Solving using equations (2) and (3), (equation 1
is redundant), substitute = 1 - into (2) to give:
.65(1 - 2) + = 2
This gives = .76471. Substituting back into (3)
gives = .23529.
Thus the expected number of accepted calls per
year is (.76471)(52) = 39.76 or about 40.
Slide 14
Example: North’s Hardware
State Probability
• Question
What is the probability Shirley will accept Henry's
next two calls if she does not accept his call this
week?
• Answer REFUSES
.35 P = .35(.35) = .1225
REFUSES
ACCEPTS
.35
.65 P = .35(.65) = .2275
REFUSES
REFUSES
.20 P = .65(.20) = .1300
ACCEPTS ACCEPTS
.65 .80 P = .65(.80) = .5200
Slide 15
Example: North’s Hardware
State Probability
• Question
What is the probability of Shirley accepting exactly
one of Henry's next two calls if she accepts his call
this week?
• Answer
The probability of exactly one of the next two calls
being accepted if this week's call is accepted can be
week and refuse the following week) and (refuse
next week and accept the following week) =
.13 + .16 = .29
Slide 16
Example: Jetair Aerospace
Slide 17
Example: Jetair Aerospace
Transition Matrix
Next Year
Retire Quit Fired Same Promotion
Current Year
Retire 1 0 0 0 0
Quit 0 1 0 0 0
Fired 0 0 1 0 0
Slide 18
Example: Jetair Aerospace
Fundamental Matrix
-1
1 0 .55 .10
N = (I - Q )-1 = -
0 1 .70 .20
-1
.45 -.10
=
-.70 .80
Slide 19
Example: Jetair Aerospace
Fundamental Matrix
The determinant, d = aa - aa
= (.45)(.80) - (-.70)(-.10) = .29
Thus,
.80/.29 .10/.29 2.76 .34
N = =
.70/.29 .45/.29 2.41 1.55
Slide 20
Example: Jetair Aerospace
NR Matrix
The probabilities of eventually moving to the
absorbing states from the nonabsorbing states are given
by:
2.76 .34 .05 .20 .10
NR = x
2.41 1.55 0 .10 0
Slide 21
Example: Jetair Aerospace
Absorbing States
• Question
What is the probability of someone who was just
promoted eventually retiring? . . . quitting? . . .
being fired?
• Answer
The answers are given by the bottom row of the NR
matrix. The answers are therefore:
Slide 22
The End of Chapter 17
Slide 23