The Economics worksheet
is created at the same time as the Matrix worksheet and
allows entry of economic data to evaluate the Markov Chain.
The cell labeled Measure holds the word describing economic
measures. Here we use cost, but it could be revenue or
profit. The "discount rate" is used to compute
the present value of the cash flows. It is the discount
rate per period of the Markov Chain.
There are two
data areas: State Cost and Transition Cost. The "state
cost" is expended whenever the chain enters a state. The
matrix for "transition cost" specifies the expenditure
caused by a transition from one state to another. For the example
problem we assume that it costs $0.1 to inspect a bulb and
$1 to replace it with a new one. Thus we have a cost of 0.1
no matter what state the system is in and assign a cost of
$1 for a transition into the next state. The Calculate button
computes the "Expected State Value", this is the
state cost plus the expected transition cost as determined
by the transition probabilities. The Matrix button returns
to the Matrix worksheet for this problem.
Operations Research Models and Methods
Internet
by Paul A. Jensen
Copyright 2004 - All rights reserved
