APPLICATION OF MARKOV CHAINS TO DEVELOP SCENARIOS FOR THE DEVELOPMENT OF LOCAL SOCIO-ECONOMIC SYSTEMS

Abstract

The paper is dedicated a methodology of using Markov chains to build scenarios for the development of local socio-economic systems under conditions of uncertainty. These systems, having their own dynamics, can remain in different states: sustainable development, stability, risk, decline and recovery. SWOT, PEST analysis, expert assessment methods are used traditionally. The scenario options are only realistic optimistic and pessimistic. In conditions of rapid changes of the economic situation, structural reforms, military aggression, methods that translate the retrospective into the future become unsuitable. The use of Markov chains in scenarios allows the decision-maker to design different options for the development of events, based on clear assumptions about the external environment, internal structure and the pace of its development, to investigate the behavior of the system in several steps. The proposed methodology was used to build a scenario for the development of a territorial community, the leading sector of the economy of which is agriculture. The key criteria are indicators of the efficiency of agricultural production. The use of Markov chains in building scenarios allowed us to develop substantiated scenarios for the sustainable development of a territorial community with different production specialization and diversification of production and environmental load. The paper proposes the selection of functions based on an expert survey. The key aspect of the methodology is the construction of a transition matrix. Data on production factors and environmental factors can be changed, which will affect the probabilities of transitions through indicators, and the transition matrix will automatically change, which will allow us to visualize the modeling process.