MAT3034 Stochastic Processes B Sc (Hons) in Actuarial Studies MAT3034 Stochastic Processes B Sc (Hons) in Actuarial Studies

BSc (Hons) in Industrial Statistics BSc (Hons) in Industrial Statistics

𝜆0 𝜆1 𝜆2 … 𝜆𝑛−1 A stochastic model can be developed based on costs or rewards associated with the
𝜋𝑛∗ =
𝜆0 𝜆1 𝜆2 … 𝜆𝑛−1
𝜇1 𝜇2 𝜇3 … 𝜇𝑛 (1 + ∑∞ 𝑛=1 𝜇 𝜇 𝜇 … 𝜇 )
1 2 3 𝑛 system policies. For example, consider that entering customers are forced to pay money

𝜆 𝑛𝑀! to the system, then the cost equation is

(𝜇 )
(𝑀 − 𝑛)!
=
𝜆 𝑛 𝑀! average rate at which the system earns
1 + ∑𝑀
𝑛=1 (𝜇 ) (𝑀 − 𝑛)!
= 𝜆𝑎 × average amount an entering customer pays (4.3)
(a) Hence, the average number of machines not in use is given by
where 𝜆𝑎 is the average arrival rate of entering customers. That is, if 𝑁(𝑡) denotes the
𝑛
𝑀!𝜆
𝑀 ∑𝑀
𝑛=0 𝑛 (𝜇 )
(𝑀 − 𝑛)! number of customer arrivals by time 𝑡, then
∑ 𝑛𝜋𝑛∗ = 𝑛
𝜆 𝑀!
𝑛=0 1 + ∑𝑀
𝑛=1 (𝜇 ) (𝑀 − 𝑛)! 𝑁(𝑡)
𝜆𝑎 = lim
𝑡→∞ 𝑡
(b) The long-run proportion of time that a given machine is working is given by
For instance, suppose that each customer pays $1 per unit time while in the system, Eq.
𝑃(machine is working)
= 𝜆𝑎 × average amount an entering customer pays (4.3) yields the Little’s formula,
𝑀

= ∑ 𝑃(machine is working|𝑛 machines is not working)𝜋𝑛∗ 𝐿 = 𝜆𝑎 𝑊

𝑛=0
Similarly, suppose that each pays $1 per unit while in queue, Eq. = 𝜆𝑎 ×
𝑀
𝑀−𝑛 ∗
=∑ 𝜋𝑛 average amount an entering customer pays (4.3) yields
𝑀
𝑛=0
𝐿𝑞 = 𝜆𝑎 𝑊𝑞
𝑀
𝑛𝜋𝑛∗
= 1−∑ By supposing that each customer pays $1 per unit time while in service,
𝑀
𝑛=0
average number of customers in service = 𝜆𝑎 E[𝑆]

where E[𝑆] is the average amount of time a customer spends in service.

Queuing theory

Some fundamental quantities of interest for queuing models are

Let 𝑁(𝑡) denote the number of customers in the system at any time 𝑡 and 𝜋𝑛∗ be the
𝐿 the average number of customers in the systems;
limiting or long-run probability that there will be exactly 𝑛 customers in the system.
𝐿𝑞 the average number of customers waiting in queue;
Then, the two set of limiting probabilities are {𝑎𝑛 , 𝑛 ≥ 0} and {𝑑𝑛 , 𝑛 ≥ 0}, where
𝑊 the average amount of time a customer spends in the system;
𝑎𝑛 = proportion of customers that find 𝑛 in the system when they arrive, and
𝑊𝑞 the average amount of time a customer spends waiting in queue.
𝑑𝑛 = proportion of customers leaving behind 𝑛 in the system when they depart

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 MAT3034 Stochastic Processes B Sc (Hons) in Actuarial Studies MAT3034 Stochastic Processes B Sc (Hons) in Actuarial Studies
BSc (Hons) in Industrial Statistics BSc (Hons) in Industrial Statistics

Proposition 4.5.1 PASTA principle Since 𝑇𝑖 is exponential with rate 𝜇, taking expectation on both sides of Eq. E[𝑁𝑖 |𝑇𝑖 ] = 𝜆𝑇𝑖

Poisson arrivals always see time averages. In particular, for Poisson arrivals, (4.4),

𝜋𝑛∗ = 𝑎𝑛 𝜆
E[𝑁𝑖 ] = 𝜆E[𝑇𝑖 ] =
𝜇

Thus, the average number of people picked up by a bus is equal to the time average

number of people waiting for a bus, as follows from the PASTA principle.
People arrive at a bus stop according to a Poisson process with rate 𝜆. Bus arrive at the

stop according to a Poisson process with rate 𝜇, with each arriving bus picking up all the
M/M/1 queue with impatient customers
currently waiting people.
Consider a single server queue where customers arrive according to a Poisson process

with rate 𝜆 and where the service time distribution is exponential with rate 𝜇. Suppose
Let 𝑊𝑞 be the average amount of time that a person waits at the stop for a bus. Since the
that each customer will only spend an exponential time with rate 𝛼 in queue before
waiting time of each person is equal to the time from when they arrive until the next bus,
quitting the system. Assume that the impatient times are independent of all else, and that
which is exponentially distributed with rate 𝜇, then
a customer who enters service always remains until its service is completed. This system
1
𝑊𝑞 =
𝜇 can be modelled as a birth and death process with birth and death rates

The average number of people waiting at the bus stop, averaged over all time, is 𝜆𝑛 = 𝜆, 𝑛≥0

𝜆 𝜇𝑛 = 𝜇 + (𝑛 − 1)𝛼, 𝑛≥1
𝐿𝑞 = 𝜆𝑊𝑞 =
𝜇

Suppose 𝜋𝑠 is the proportion of arrivals that receive service and 𝜆𝑠 be the average rate at
To illustrate the PASTA principle, let 𝑁𝑖 be the number of people picked up by the 𝑖-th
which customers are served, then
bus, then 𝑇𝑖 equal to the time between the (𝑛 − 1)-th and the 𝑛-th bus arrival,
𝜆𝑠
𝜋𝑠 =
E[𝑁𝑖 |𝑇𝑖 ] = 𝜆𝑇𝑖 (4.4) 𝜆

because the number of people that arrive at the stop in any time interval is Poisson with Since the service departure rate is zero when the system is empty and is 𝜇 when the

a mean equal to 𝜆 times the length of the time interval. system is non-empty, 𝜆𝑠 = 𝜇(1 − 𝜋0∗ ) yields that
𝜇
𝜋𝑠 = (1 − 𝜋0∗ )
𝜆

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 MAT3034 Stochastic Processes B Sc (Hons) in Actuarial Studies MAT3034 Stochastic Processes B Sc (Hons) in Actuarial Studies
BSc (Hons) in Industrial Statistics BSc (Hons) in Industrial Statistics

Remark. Now consider the average length of a busy period, where the system alternates between

Following Example 4.5.3, to determine the proportion of all events that are of a certain idle periods when there are no customers in the system and busy periods when there is

type 𝑖, 𝑖 = 1, 2, 3, … , 𝑘, at least one customer in the system. An idle period begins when the system is empty and

rate at which type 𝑖 events occur ends when the next customers arrives. Since the arrival rate when the system is empty is
proportion of events that are type 𝑖 =
rate at which all events occur
𝜆0 , it follows that, independent of the past, the length of an idle period is exponential with

rate 𝜆0 . The lengths of successive busy periods are independent and identically
To determine the average time that a customer spends in the system, for the birth and
distributed as well, since a busy period always begins when there is one in the system
death queuing system,
and ends when the system is empty.
∞

𝐿 = ∑ 𝑛𝜋𝑛∗
𝑛=0
Let 𝐼𝑗 and 𝐵𝑗 denote, respectively, the lengths of the 𝑗-th idle and the 𝑗-th busy period, 𝑗 ≥
Also, the average arrival rate of customer is
∞ 1 . In the first ∑𝑛𝑗=1(𝐼𝑗 + 𝐵𝑗 ) time units, the system will be empty for a time ∑𝑛𝑗=1 𝐼𝑗 .
𝜆𝑎 = ∑ 𝜆𝑛 𝜋𝑛∗
𝑛=0
Consequently, the long-run proportion of time in which the system is empty,

Consequently, 𝐼1 + ⋯ + 𝐼𝑛
𝜋0∗ = lim
𝑛→∞ 𝐼1 + ⋯ + 𝐼𝑛 + 𝐵1 + ⋯ + 𝐵𝑛
𝐿 ∑∞ ∗
𝑛=0 𝑛𝜋𝑛
𝑊= = (𝐼1 + ⋯ + 𝐼𝑛 )
𝜆𝑎 ∑∞ 𝜆 𝜋
𝑛=0 𝑛 𝑛
∗

= lim 𝑛
𝑛→∞ (𝐼1 + ⋯ + 𝐼𝑛 ) (𝐵 + ⋯ + 𝐵𝑛 )
+ 1
𝑛 𝑛
Now consider 𝑎𝑛 , the proportion of arrivals that find 𝑛 in the system. Since arrivals are at E[𝐼]
=
E[𝐼] + E[𝐵]
rate 𝜆𝑛 whenever there are 𝑛 is the system, it follows that the rate at which arrivals find
1
𝑛 in 𝜆𝑛 𝜋𝑛∗ . Hence in a large amount of time 𝑡, approximately 𝜆𝑛 𝜋𝑛∗ 𝑡 of the approximately 𝜆0
=
1
𝜆𝑎 𝑡 arrivals will encounter 𝑛. Hence + E[𝐵]
𝜆0

𝜆𝑛 𝜋𝑛∗ 𝑡 𝜆𝑛 𝜋𝑛∗ 1
𝑎𝑛 = lim = =
𝑡→∞ 𝜆𝑎 𝑡 𝜆𝑎 1 + 𝜆0 E[𝐵]

or

1 − 𝜋0∗
E[𝐵] =
𝜆0 𝜋0∗

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 MAT3034 Stochastic Processes B Sc (Hons) in Actuarial Studies
BSc (Hons) in Industrial Statistics

Now, suppose 𝑇𝑛 is the amount of time during a busy period that there are 𝑛 in the

system, and E[𝑇𝑛 ] is the average amount of time there are 𝑛 in the system in intervals

between successive busy periods. Since the average time between successive busy period

is E[𝐵] + E[𝐼],

E[𝑇𝑛 ]
𝜋𝑛∗ =
E[𝐼] + E[𝐵]

E[𝑇𝑛 ]𝜋0∗
=
E[𝐼]

Hence,

𝜋𝑛∗
E[𝑇𝑛 ] =
𝜆0 𝜋0∗

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