Potential Entrants and Projections in Markov Process Analysis

Stanton, Bernard F.; Kettunen, Lauri

Potential Entrants and Projections in Markov Process Analysis

1967

Stanton, Bernard F. | Kettunen, Lauri

Markov processes, despite their limitations, are becoming more widely used as a method of making projections of size and income distributions. The number of potential entrants to an industry or a population assumed in an analysis has an important effect on both short‐run projections and equilibrium solutions. The number of potential entrants is not a passive variable, as has often been said or implied. Through the use of changes in the number and size of dairy farms in New York State as an example, alternative projections in the short run are presented for different assumptions about the number of potential entrants. The general case is developed algebraically for the effect of the number of potential entrants assumed (N) on the equilibrium solution for the vector t.

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