Reply
Thu 10 Apr, 2014 07:05 am
Experience shows that whether on not a bidder is successful depends on the results of his previous two bids. If both were successful, his next bid will be successful with probability 0.6.
However, if only one of his last two bids was successful, the probability that his next bid will be successful is 0.8. If neither of his last two bids was successful, his next bid will be successful with probability 0.7. At bid n, let Xn record the result of his last two bids. Agree that {Xn; n = 0; 1;.........} is a Markov chain with state space S = {sf; ss; fs; ff}
what is the limiting probability of a successful bid??