Markov Reward Models and Markov Decision Processes in Discrete and Continuous Time: Performance Evaluation and Optimization

Abstract. State-based systems with discrete or continuous time are of-ten modelled with the help of Markov chains. In order to specify perfor-mance measures for such systems, one can define a reward structure over the Markov chain, leading to the Markov Reward Model (MRM) formal-ism. Typical examples of performance measures that can be defined in this way are time-based measures (e.g. mean time to failure), average en-ergy consumption, monetary cost (e.g. for repair, maintenance) or even combinations of such measures. These measures can also be regarded as target objects for system optimization. For that reason, an MRM can be enhanced with an additional control structure, leading to the formalism of Markov Decision Processes (MDP). In this tutorial, we first introduce the MRM formalism with different types of reward structures and explain how these can be combined to a performance measure for the system model. We provide running exam-ples which show how some of the above mentioned performance measures can be employed. Building on this, we extend to the MDP formalism and introduce the concept of a policy. The global optimization task (over the huge policy space) can be reduced to a greedy local optimization by exploiting the non-linear Bellman equations. We review several dynamic programming algorithms which can be used in order to solve the Bellman equations exactly. Moreover, we consider Markovian models in discrete and continuous time and study value-preserving transformations between them. We accompany the technical sections by applying the presented optimization algorithms to the example performance models.