Answer to Question #144078 in Statistics and Probability for Fridah

Question #144078
n a study of the domestic market share of three major automobile manufacturers A, B and C in a certain country, it was found out that of the customers who bought a car manufactured by A, 75% would again buy a car manufactured by A, 15% would buy a car manufactured by B and the rest would buy a car manufactured by C. Of the customers who bought a car manufactured by B, 90% would again buy a car manufactured by B, 5% would buy a car manufactured by A and the rest would buy a car manufactured by C. Of the customers who bought a car manufactured by C, 85% would again buy a car manufactured by C, 5% would buy a car manufactured by A and the rest would buy a car manufactured by B.
Required
The long run market share of the manufacturers (14 Marks)
1
Expert's answer
2020-11-15T18:37:05-0500
SolutionSolution

The above is an example of 3×33\times3 Markov chain.

To calculate the long run market share of the manufacturers, we need to create first 3×33\times3 transition matrix for this problem. The columns denote the conditional probability of buying a car manufactured by three companies and rows represents the respective manufacturer of the car


Hence the matrix TT will be equal to


We can define T(n)T^{(n)} as an n step transition matrix, now we can find T(2)T^{(2)}


Now let us assume the current share in the market for different manufacturers as s0=[0.56, 0.24, 0.20]s_0 = [0.56,\ 0.24,\ 0.20] , then the companies share after two years



s2=s0T2    [0.3612, 0.37885, 0.25995]s_2 = s_0 * T_2\\ \implies[0.3612,\ 0.37885,\ 0.25995]

Hence percentage share will be A=36.12%, B=37.885%A = 36.12\%,\ B = 37.885\% and C=25.995%C = 25.995\%



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