Markov properties, Managerial Accounting

Markov Properties

1) Transition probabilities are dependent only on the current state of the system i.e. provided that the current state is recognized; the conditional probability of the next state is independent of the states, prior to the current state. (This is known as property of no memory).

2) The transition probabilities are constant over time.

3) The transition probabilities of moving to alternative states in the next time period, given a state in the current time period, must sum to one.

These properties are quite restrictive and hence the application of Markov Analysis is limited to few real-world problems.

Given that a set of possible states in Markov Chain is finite, a square matrix, P, made up of all Pij's of Markov Chain can be formed.

The following table represents the commonly used transition probability matrix.


Where n is the number of exhaustive and mutually exclusive states.

Pij is the transition probability of going from the present i th state to the next j th state.

Thus the rows represent the possible present states (i's) and columns, represent the possible future states (j's).

By definition     P11 +    P12 +    P13 +........ P1n = 1
Similarly,         P21 +    P22 +    P23 +........  P2n = 1 etc.


Posted Date: 12/8/2012 4:29:08 AM | Location : United States

Related Discussions:- Markov properties, Assignment Help, Ask Question on Markov properties, Get Answer, Expert's Help, Markov properties Discussions

Write discussion on Markov properties
Your posts are moderated
Related Questions
Debt equity ratio Meaning: this ratio establishes a relationship among long term debts and share holders funds. Objective: the objective of computing this ratio is to me

1. Do you think that the tax minimization scheme described to Debbie Kishimoto is in harmony with the ethical behavior that should be displayed by top corpo- rate executives? Wh

Production As you would suspect, effectively directing an organization needs prudent management of production. Because this is a hands-on process, and often entails dealing wit

depreciation,depletion and amortisation

How might a company use regression results to manage overhead costs?

What is Master budget Financial budget are concerned with cash receipts and disbursements working capital. Several functional budgets are integrated into master budget. This bu

1. Paid $350,000 to purchase furniture and leased it to DEF Corp. for 5 years. DEF agreed to pay $89,955 on July 1 for each of the next 5 years.  At the end of the lease term we ex

Decision-making is an integral part of all management functions. It is the process of choosing the among alternative courses of action. Managers have to

how company apply marginal costing techniques show with an example