Markov analysis is a method in statistics and signal processing used to model and predict

transient systems. It is based on a series of states and the probability of transitions

between those states, based on past observations. Markov analysis is commonly used in
many fields such as economics, biology, and machine learning applications.
To visualize data from a Markov analysis in an economic example, you can use a
transition matrix plot or a flow chart.
- Transition Matrix Chart: This chart shows the transition probabilities between
states. It is often represented by a matrix, where rows and columns correspond to
states, and the value in each cell is the transition probability from the row state to
the column state.
- Flow Chart: This chart shows transitions between states as flows. The size of the
flow usually corresponds to the probability of transitions between states.
The meaning of Markov analysis is:
- Prediction and modeling: Markov analysis helps predict and model transitions
between states in a system, based on observations and transition probabilities from
the past.
- Understanding trends: It helps to understand trends and transition patterns between
states, thereby providing important information for evaluating and predicting the
future of the system.
- Risk management and optimization: Markov analysis can be used to manage risk
and optimize processes, for example inventory management, supply chain
management, or customer service management row.
- Applications in many fields: Markov analysis can be applied in many fields such
as economics, finance, biology, medicine, engineering, and information systems,
helping to improve performance and understanding of complex processes and
systems.
Steps:
- Data Collection: Collect data about transitions between system states from past or
current observations.
- Build a transition matrix: Create a matrix with the number of rows i and columns j
equal to the number of states in the system. Assign conversion values to each
corresponding cell in the matrix.
- Perform probability calculation: Calculate the transition probability, check that all
are greater than 0 and less than 1, the sum of each row is 1.
- Use the matrix for prediction and analysis purposes: After validating the matrix,
you can use it to predict and analyze trends and transition patterns between system
states.
Suppose a company predicts customer behavior after a period of time using its service
packages or opting out. The company is interested in the conversion of statuses: Basic
package (A), Standard package (B), Premium package (C), Unused or stopped using (D).
A B C D
A 0.7 0.2 0.05 0.05
B 0.1 0.6 0.2 0.1
C 0.05 0.1 0.7 0.15
D 0.2 0.1 0.1 0.6
Explanation of meaning:
- Line A The probability of switching from Basic Package to another Package is
Standard Package 20%, Premium Package 5%, Cancel 5%.
- Line B The probability of switching from Standard Package to another Package is
Basic Package 10%, Premium Package 20%, Cancel 10%.
- Line C The probability of switching from a Premium Package to another Package
is Basic Package 5%, Standard Package 10%, Cancel 15%.
- Line D Probability of converting from unused to used packages: Basic Package
20%, Standard Package 10%, Premium Package 10%.
In short, each value in the matrix indicates the probability of transitioning from one state
to another, providing important information for predicting customer behavior and
developing business strategies.