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March 20th, 2014, 03:17 AM   #1
Joined: Nov 2013

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Markov Probability Matriv

This is a question that I have for an assignment.

I am struck to how to solve it, attached is a spreadsheet that I have used to try and solve it but I think that I am doing it wrong!!!

S1: New tyres
S2: Lightly worn
S3: Moderately worn
S4: Threadbare

If the company decides to replace a tyre during inspection it costs 30 in labour per tyre. If however the tyre fails in use then the cost of replacing the tyre is estimated at 50. Based on past inspections the following transition matrix applies between one inspection and the next.

1 2 3 4
1 0 0.9 0.1 0
State 2 0 0.6 0.3 0.1
3 0 0 0.7 0.3

The current policy is only replacing the tyres when they are in State 4. Should the company adopt a policy of replacing all tyres found in State 3 or worse on inspection?
Attached Files
File Type: xlsx Questionnr6.xlsx (10.9 KB, 0 views)
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