2. Management of the New Fangled Softdrink Company believes that the probabili

2. Management of the New Fangled Softdrink Company believes that the probability of a customer purchasing Red Pop or the company major competition Super Cola
is based on the customers most recent purchase. Suppose that the following transition probabilities are appropriate:

To

From Red Pop Super Cola

Red Pop 0.9 0.1

Super Cola 0.1 0.9

a. Show the two-period tree diagram for a customer who last purchased Red Pop. What is the probability that this customer purchases Red Pop on the second
purchase?

b. What is the long-run market share for each of these two products?