2. Description Sometimes we are interested in how a random variable changes over time. The study of how a random variable evolves over time includes Stochastic Processes .
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20. Question Find the equilibrium market shares of two firms whose probability transition matrix is as follows .5 .5 B .3 .7 A B A
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22. All states communicate with each other Starting from 1, the MC can return to 1 in three steps via two possible routes: Route 1: 1 to 3 to 2 to 1 with probability .5 ×1 ×.5 = 1/4 Route 2: 1 to 2 to 2 to 1 with probability .5 ×.5×.5 = 1/8 Hence the required probability is =1/4+1/8 = 3/8 .
