Singularly perturbed Markov chains with two small parameters: A matched asymptotic expansion (Q5961166)

The paper deals with asymptotic properties of solutions to forward equations for singularly perturbed Markov chains with two small parameters. The motivation for this work comes from a production-marketing system. The goal is on one hand to find asymptotic optimal strategies for a cost-minimizing firm involving production planning and capacity expansion with a two-level hierarchical decomposition by using the limit distribution of the Markov chains. However, the focus of this paper is to obtain asymptotic properties of the solutions to the forward equation satisfied by the probability vector. The paper starts with an example and introduces then formally the model. The next section is devoted to the analysis of the asymptotic expansion followed by a section about the corresponding error analysis. In the last section certain extensions of the model are discussed and a brief outlook to further research is given.