Problem 1.

Markov chains (steady state):

XYZ insurance company charges its customers according to their accident history. If you
have not had accidents the last two years will be charged for the new policy $ 1,730,000
(state 0); if you have had an accident in each of the last two years you will be charged $
2,280,000 (State 1); If you had accidents the first of the last two years you will be charged
$ 1,650,000 (state 2) and if you had an accident the second of the last two years will be
charged $ 1,670,000 (State 3). The historical behavior of each state is given by the
following cases of accident, taken in four different events

a. What is the transition matrix resulting from proportionality according to the

accident history?

E0: Si no ha tenido accidentes los 2 últimos años ($ 1,730,000)

E1: Ha tenido un accidente en cada año de los 2 últimos años (2,280,000)
E2: Ha tenido un accidente el primero de los 2 últimos años (1,650,000)
E3: Ha tenido un accidente el segundo de los 2 últimos años ($ 1,670,000)

Matriz de Probabilidades de transición

 Estado E0 E1 E2 E3 Total
E0 0,3 0,2 0,4 0,1 1
E1 0,1 0,3 0,5 0,1 1
E2 0,2 0,1 0,1 0,6 1
E3 0,3 0 0,2 0,5 1

What is the transition matrix resulting from proportionality according to the

accident history?

Estado E0 E1 E2 E3
E0 0,3 0,2 0,4 0,1
E1 0,1 0,3 0,5 0,1
E2 0,2 0,1 0,1 0,6
E3 0,3 0 0,2 0,5

E0 E1 E2 E3
E0 0,22 0,16 0,28 0,34
E1 0,19 0,16 0,26 0,39
E2 0,27 0,08 0,26 0,39
E3 0,28 0,08 0,24 0,4

E0 E1 E2 E3
E0 0,24 0,12 0,264 0,376
E1 0,242 0,112 0,26 0,386
E2 0,258 0,104 0,252 0,386
 E3 0,26 0,104 0,256 0,38

E0 E1 E2 E3
E0 0,25216 0,1088 0,25728 0,38176
E1 0,2528 0,10832 0,25712 0,38176
E2 0,25264 0,10896 0,25744 0,38096
E3 0,25248 0,10912 0,2576 0,3808

E0 E1 E2 E3
0,252475248 0,108910891 0,257425743 0,3811881

Prima promedio= (0,252475248 ∗ 1,730,000)) + (0,108910891 ∗ 2,280,000) +

(0,257425743 ∗ 1,650,000) + ( 0,3811881 ∗ 1,670,000) = $𝟎. 𝟗𝟓𝟒𝟐𝟔𝟓𝟖𝟒𝟐𝟑
Problem 2. Markov chains (Initial state multiplication):

In Colombia there are 5 main mobile operators such as Tigo, Comcel, Movistar, ETB and
Uff, which we will call states. The following chart summarizes the odds that each client has
to stay in their current operator or make a change of company.

Los porcentajes actuales que tiene cada operador en el mercado actual son para Tigo 0.25
para Comcel 0.2, para Movistar 0.3, para ETB 0,1 y 0,15 para Uff (estado inicial).

b. Find the probability that each user stays with the mobile company for the next
period.

Se usa la función de Excel MMULT para conseguir los valores del estado 1

ESTADO 0

ESTADO TIGO COMCEL MOVISTAR ETB UFF Probabilidades iniciales

TIGO 0,18 0,28 0,19 0,18 0,17 0,17

COMCEL 0,21 0,23 0,17 0,25 0,25 0,14
MOVISTAR 0,19 0,16 0,23 0,26 0,26 0,16
ETB 0,18 0,19 0,23 0,21 0,21 0,19
UFF 0,22 0,23 0,19 0,17 0,17 0,19
 TIGO COMCEL MOVISTAR ETB UFF P0
0,17 0,14 0,16 0,19 0,19 Probabilidad

ESTADO 1
Probabilidades
ESTADO TIGO COMCEL MOVISTAR ETB UFF
iniciales
TIGO 0,1869 0,2011 0,2055 0,2336 0,1729 0,25
COMCEL 0,1964 0,1968 0,1927 0,229 0,1851 0,2
MOVISTAR 0,1848 0,2155 0,1866 0,2434 0,1697 0,3
ETB 0,194 0,1995 0,1915 0,2333 0,1817 0,1
UFF 0,1904 0,2007 0,1963 0,233 0,1796 0,15

Se usa MMULT para encontrar los porcentajes

TIGO COMCEL MOVISTAR ETB UFF P1

0,1825 0,2 0,206 0,238 0,1735 Probabilidad

SOLVER
 TIGO COMCEL MOVISTAR ETB UFF SUMA
0,19070368 0,20258081 0,19431523 0,2343953 0,17800499 1
0,19070368 0,20258081 0,19431523 0,2343953 0,17800499
Problem 4. Markov chains (Initial state multiplication):

Suppose that 4 types of soft drinks are obtained in the market: Colombian, Pepsi Cola,
Fanta and Coca Cola when a person has bought Colombian there is a probability that they
will continue to consume 40%, 20% of which will buy Pepsi Cola, 10% that Fanta buys and
30% that Coca Cola consumes; when the buyer currently consumes Pepsi Cola there is a
probability that he will continue to buy 30%, 20% buy Colombiana, 20% that Fanta
consumes and 30% Coca Cola; if Fanta is currently consumed, the likelihood of it
continuing to be consumed is 20%, 40% buy Colombian, 20% consume Pepsi Cola and 20%
go to Coca Cola. If you currently consume Coca Cola the probability that it will continue to
consume is 50%, 20% buy Colombian, 20% that consumes Pepsi Cola and 10% that is
passed to Fanta.

At present, each Colombian brand, Pepsi Cola, Fanta and Coca Cola have the following
percentages in market share respectively (30%, 25%, 15% and 30%) during week 3.

c. Find the transition matrix

d. Find the probability that each user stays with the mark or change to another for
period 4 (problem 4) and period 5 (problem 5).