Question 1

Part a
An input-output model is an economic analysis tool that captures inter-sectoral interactions by
showing how outputs from one industry are used as inputs by another, highlighting dependencies
and overall economic impact (Miller & Blair, 2009).
Part b
Question 2
Part a
A Markov chain/process is a mathematical model that describes a sequence of events where the
probability of transitioning to a future state depends solely on the current state, characterized by
memorylessness and stationary transition probabilities (Gagniuc, 2017).
Part b
I.
Ii.
Iii.
Yes, I would expect the actual market share to approach the long-run prediction for the following
reasons:

1. Markov Property: Markov processes assume that future states depend only on the
current state and not on the sequence of events that preceded it. This property helps the
system stabilize to a steady state over time (Salemi, 1997).
2. Probabilistic Nature: The transition matrix represents probabilities that capture the long-
term behavior of brand switching. Over time, the randomness averages out, and the
market shares converge to the steady-state probabilities.
3. Equilibrium: In the long run, the system reaches an equilibrium where the inflows and
outflows between brands balance out, leading to stable market shares.

Question 3

(a) Meaning and Applications of Queuing Systems

Queuing Systems: Queuing systems are models used to analyze the behavior of waiting lines.
These systems help in understanding and optimizing various aspects of service delivery where
there are limited resources (servers) and numerous demands (customers) (Salemi, 1997).

Applications in Management:

1. Healthcare Management: Managing patient flow in hospitals to minimize waiting times

and optimize the utilization of medical staff and resources.
2. Customer Service Centers: Designing efficient layouts and staffing schedules in call
centers to handle incoming calls effectively and reduce customer wait times.

(b) Characteristics of Queuing Systems

1. Arrival Rate (λ): The rate at which customers arrive at the queue, often modeled using a
Poisson distribution (Salemi, 1997).
2. Service Rate (μ): The rate at which servers can serve customers, often modeled using an
exponential distribution.
3. Number of Servers (s): The number of service points available to handle customer
requests.
4. Queue Discipline: The rule by which customers are served, such as First-In-First-Out
(FIFO) or Last-In-First-Out (LIFO).

Part c

Question 4
i) Pure Strategy A pure strategy in game theory is a strategy that involves making a specific
choice or action consistently. In other words, it is a strategy where a player makes a definite
decision and sticks to it throughout the game. Each player chooses one strategy without
randomness.

ii) Mixed Strategy A mixed strategy is one where a player chooses between different strategies
according to a probability distribution. Instead of consistently choosing one action, the player
assigns a probability to each possible action and then makes a random choice based on these
probabilities. This allows for strategic diversity and can sometimes lead to better outcomes in the
context of the game's uncertainty.

iii) Zero-Sum Game A zero-sum game is a type of game in which the total gain and loss among
all players sum to zero. In other words, one player's gain is exactly balanced by the losses of
other players. The total "payoff" remains constant, so any advantage gained by one player
directly results in a corresponding disadvantage to the other player(s).

(b) Limitations of Game Theory

1. Assumption of Rationality: Game theory assumes that all players are rational and will
always act in their best interest. In reality, players may act irrationally due to incomplete
information, emotions, or other cognitive biases (Salemi, 1997).
2. Simplified Models: Real-world scenarios are often much more complex than the models
used in game theory. Simplified assumptions and models may not capture all the nuances
and dynamics of actual strategic interactions (Salemi, 1997)..
3. Static Nature: Many game theory models are static and do not account for the dynamic
changes in strategies and payoffs over time. This can limit the applicability of game
theory to evolving situations where strategies and payoffs change as the game progresses
(Salemi, 1997).

Find the maximin and minimax values to determine if there is a saddle point (which would give
us a pure strategy solution).

Step 1: Find the Maximin Value for Player A

● Row I: minimum payoff = −3-3−3

● Row II: minimum payoff = 000
● Row III: minimum payoff = −4-4−4

Maximin value for Player A is the maximum of these minimums:

max⁡(−3,0,−4)=0\max(-3, 0, -4) = 0max(−3,0,−4)=0

Step 2: Find the Minimax Value for Player B

● Column I: maximum payoff = 555

● Column II: maximum payoff = 000
● Column III: maximum payoff = 666

Minimax value for Player B is the minimum of these maximums:

min⁡(5,0,6)=0\min(5, 0, 6) = 0min(5,0,6)=0

Since the maximin value (0) equals the minimax value (0), there is a saddle point, and the value
of the game is 0. The optimum strategies for the players can be determined by identifying the
row and column corresponding to this value.
From the analysis:

● Player A should choose Strategy II.

● Player B should choose Strategy II.

Thus, the optimum strategies are:

● Player A: Strategy II
● Player B: Strategy II
● Value of the game: 0

References
Miller, R. E., & Blair, P. D. (2009). Input-output analysis: Foundations and extensions (2nd ed.).
Cambridge University Press. https://doi.org/10.1017/CBO9780511626982.
Gagniuc, P. A. (2017). Markov chains: From theory to implementation and experimentation.
John Wiley & Sons. https://doi.org/10.1002/9781119387596.
Salemi, N. A. (1997). Quantitative Techniques. Salemi, Nairobi, 373.