It is a stochastic model, describing the problem of decision-making under risk. Main assessment criterion are: income, gain or loss, time.
According to Markov model the behavior of consumers in the market is a continuous decision-making process, in which specific states are following one after the other in a given period of time. They are dependent on the specific state of consumer or environment preceding this process. So this model adopts a conditional probability of reaching the individual states or results.
Elements of Markov model
- option or variant of choice (state),
- cycle (time) - the shorter the cycle, the more the model reflects the real situation,
- probability of transition from one state to the next state in a given unit of time.
Application of Markov model
This research is not very difficult and complicated, therefore, is often and willingly carried out in small companies.
- Rabiner, L. R., & Juang, B. H. (1986). An introduction to hidden Markov models. ASSP Magazine, IEEE, 3(1), 4-16.