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Theory of Decisions
April 2018
Introduction.
This work aims to deepen the issues related to the course of Decision Theory Through
the application of different exercises using mathematical logical reasoning and the
management of different topics as it is: basic concepts and decisions under an
environment of certainty; Decisions Under an environment Risk; Decisions Under an
environment Uncertainty using matrices necessary for decisions with Markov chains.
Exercises solved according to the proposed theme
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 $
1,580,000 (state 0); if you have had an accident in each of the last two years you will be
charged $ 2,150,000 (State 1); If you had accidents the first of the last two years you
will be charged $ 1,630,000 (state 2) and if you had an accident the second of the last
two years will be charged $ 1,550,000 (State 3). The historical behavior of each state is
given by the following cases of accident, taken in four different events.
E1 You have had an accident in each of the last two years ($ 2,150,000)
E2 You had accidents the first of the last two years ($ 1,630,000)
E3 You had an accident the second of the last two years ($ 1,550,000)
The historical behavior of each state is given by the following cases of accident
Σ
=
W
0,3 0,2 0,4 0,1 1
X p= 0,1 0,3 0,5 0,1 = 1 q= W X Y Z
Y 0,2 0,1 0,1 0,6 = 1
Z 0,3 0 0,2 0,5 = 1
p*q =
EC1 0,3W+0,1X+0,2Y+0,3Z =W
EC2 0,2W+0,3X+0,1Y+0Z =X
EC3 0,4W+0,5X+0,1Y+0,2Z =Y
EC4 0,1W+0,1X+0,6Y+0,5Z =Z
EC5 W+X+Y+Z =1
The transition matrix for a Markov chain of n states is a matrix of n x n with all non-
negative records and with the additional property that the sum of the records of each
EC1 0,3W-W+0,1X+0,2Y+0,3Z =0
EC2 0,2W+0,3X-X+0,1Y+0Z =0
EC3 0,4W+0,5X+0,1Y-Y+0,2Z =0
EC4 0,1W+0,1X+0,6Y+0,5Z-Z =0
EC5 W+X+Y+Z-1 =0
EC1 -0,7W+0,1X+0,2Y+0,3Z = 0
EC2 0,2W-0,7X+0,1Y =0
EC3 0,4W+0,5X-0,9Y+0,2Z =0
EC4 0,1W+0,1X+0,6Y-0,5Z =0
EC5 W+X+Y+Z-1 =0
E0 E1 E2 E3
W X Y Z
0,25247525 0,10891089 0,25742574 0,38118812
COEFFICIENTS
W X Y Z INDEPENDENT
-1 0,1 0,2 0,3 0
0,2 -1 0,1 0 0
0,4 0,5 -1 0,2 0
0,1 0,1 0,6 -1 0
1 1 1 1 -1
EQUAL TO
3E-17
-2E-17
1E-16
-6E-17
0E+00
The average premium paid in the company XYZ is 0,2524 ($ 1'580.000) + 0,1089 ($
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.
The current percentages of each operator in the current market are for Tigo 0.25 for
Comcel 0.2, for Movistar 0.3, for ETB 0.1 and 0.15 for Uff (initial state).
According to Tables 2 and 3 by applying the Markovian criteria, solve the multiplication
of the initial state vector (market share) by the probability matrix (transition matrix).
Answer:
a. Find the probability that each user stays with the mobile company for the next
period.
TRANSITION MATRIX
COMCE MOVISTA
STATE TIGO L R ETB UFF SUM
E1
TIGO 0,18 0,28 0,19 0,18 0,17 1
COMCEL 0,21 0,23 0,17 0,25 0,14 1
MOVISTA
R 0,19 0,16 0,23 0,26 0,16 1
ETB 0,18 0,19 0,23 0,21 0,19 1
UFF 0,22 0,23 0,19 0,17 0,19 1
INITIAL STATE
TIGO COMCEL MOVISTAR ETB UFF SUM
EI 0,25 0,2 0,3 0,1 0,15 1
In Colombia there are 6 main mobile operators such as Avantel, 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.
STATE AVANTEL TIGO COMCEL MOVISTAR ETB UFF
AVANTEL 0,19 0,18 0,17 0,15 0,19 0,12
TIGO 0,17 0,15 0,16 0,16 0,18 0,18
COMCEL 0,16 0,19 0,17 0,17 0,16 0,15
MOVISTAR 0,18 0,18 0,19 0,18 0,15 0,12
ETB 0,15 0,16 0,19 0,15 0,18 0,17
UFF 0,15 0,16 0,17 0,19 0,18 0,15
The current percentages of each operator in the current market are for Avantel 0.1, Tigo
0.15 for Comcel 0.15, for Movistar 0.35, for ETB 0.1 and 0.15 for Uff (initial state).
According to Tables 2 and 3 by applying the Markovian criteria, solve the multiplication
of the initial state vector (market share) by the probability matrix (transition matrix).
Answer:
a. Find the probability that each user stays with the mobile company for the next
period.
1 2 3 4 5 6
STATE AVANTEL TIGO COMCEL MOVISTAR ETB UFF
1 AVANTEL 0,19 0,18 0,17 0,15 0,19 0,12
2 TIGO 0,17 0,15 0,16 0,16 0,18 0,18
3 COMCEL 0,16 0,19 0,17 0,17 0,16 0,15
4 MOVISTAR 0,18 0,18 0,19 0,18 0,15 0,12
5 ETB 0,15 0,16 0,19 0,15 0,18 0,17
6 UFF 0,15 0,16 0,17 0,19 0,18 0,15
1 2 3 4 5 6
AVANTEL TIGO COMCEL MOVISTAR ETB UFF
1 0,1 0,15 0,15 0,35 0,1 0,15
1 2 3 4 5 6
MATRIZ 1 STATE AVANTEL TIGO COMCEL MOVISTAR ETB UFF
1 AVANTEL 0,19 0,18 0,17 0,15 0,19 0,12
2 TIGO 0,17 0,15 0,16 0,16 0,18 0,18
3 COMCEL 0,16 0,19 0,17 0,17 0,16 0,15
4 MOVISTAR 0,18 0,18 0,19 0,18 0,15 0,12
5 ETB 0,15 0,16 0,19 0,15 0,18 0,17
6 UFF 0,15 0,16 0,17 0,19 0,18 0,15
1 2 3 4 5 6
MATRIZ 2
AVANTEL TIGO COMCEL MOVISTAR ETB UFF
1 0,1 0,15 0,15 0,35 0,1 0,15
the probabilities that each user remains in the mobile phone company during the
next period are:
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.
According to the data of problem 4 and 5 by applying the Markovian criteria, solve the
multiplication of the initial state vector (market share) by the probability matrix (transition
matrix). Answer:
Suppose you get 6 types of Jeans brands in the Colombian market: Brand 1, Brand 2,
Brand 3, Brand 4, Brand 5 and Brand 6. The following table shows the odds that you
continue to use the same brand or change it.
STATE BRAND 1 BRAND 2 BRAND 3 BRAND 4 BRAND 5 BRAND 6
BRAND 1 0,18 0,18 0,19 0,15 0,15 0,15
BRAND 2 0,15 0,18 0,15 0,15 0,18 0,19
BRAND 3 0,19 0,17 0,18 0,18 0,15 0,13
BRAND 4 0,16 0,16 0,15 0,19 0,17 0,17
BRAND 5 0,19 0,19 0,17 0,16 0,16 0,13
BRAND 6 0,17 0,2 0,18 0,2 0,15 0,19
At present, brand, have the following percentages in market share respectively (19%,
18%, 17%, 15%, 19% y 12%) during week 4.
According to the data of problem 4 and 5 by applying the Markovian criteria, solve the
multiplication of the initial state vector (market share) by the probability matrix (transition
matrix). Answer: