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Mover‐stayer model with covariate effects on stayer's probability and mover's transitions

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  • H. Frydman
  • A. Matuszyk
  • C. Li
  • W. Zhu

Abstract

A discrete time Markov chain assumes that the population is homogeneous, each individual in the population evolves according to the same transition matrix. In contrast, a discrete mover‐stayer (MS) model postulates a simple form of population heterogeneity; in each initial state, there is a proportion of individuals who never leave this state (stayers) and the complementary proportion of individuals who evolve according to a Markov chain (movers). The MS model was extended by specifying the stayer's probability to be a logistic function of an individual's covariates but leaving the same transition matrix for all movers. We further extend the MS model by allowing each mover to have her/his covariates dependent transition matrix. The model for a mover's transition matrix is related to the extant Markov chains mixture model with mixing on the speed of movement of Markov chains. The proposed model is estimated using the expectation‐maximization algorithm and illustrated with a large data set on car loans and the simulation.

Suggested Citation

  • H. Frydman & A. Matuszyk & C. Li & W. Zhu, 2019. "Mover‐stayer model with covariate effects on stayer's probability and mover's transitions," Applied Stochastic Models in Business and Industry, John Wiley & Sons, vol. 35(5), pages 1171-1184, September.
    • Handle: RePEc:wly:apsmbi:v:35:y:2019:i:5:p:1171-1184
    DOI: 10.1002/asmb.2458
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