MIT15_053S13_rec10sol

MIT15_053S13_rec10sol - Optimization Methods in Management...

Info icon This preview shows pages 1–3. Sign up to view the full content.

View Full Document Right Arrow Icon
Optimization Methods in Management Science MIT 15.053, Spring 2013 Recitation 10, Friday May 3th, 2013 Problem 1 The Airfare Problem 1 . You are trying to get the cheapest airfare that you can. You just called up and found that the ticket home will cost $400, and it cannot be refunded or exchanged. You can also buy a ticket for $450, which can be refunded for $430 (and thus costs you $20). The price of tickets will change in one week, and you will have one more chance to buy a ticket. There is a 50% chance that the ticket would cost $300, and a 50% chance that it would cost $600. What should you do to minimize the expected expense? Write the Airfare problem as a decision tree, and solve it. Solution. The decision tree is: The optimal decision is to buy the refundable ticket for $450, and then wait to see what the price of the airline ticket is the second time. If the price is $300, refund the old ticket (for $430) and buy the ticket at $300, paying a total of $320. If the price is $600, keep the refundable ticket you bought. The expected cost of your ticket is $385. Problem 2 1 This problem is also discussed in the class.
Image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
Value of Information Suppose Tom is at a carnival and while there he sees a green monkey stuffed animal that he would like to have. In order to win the stuffed monkey Tom needs to play a game that costs $1. In the game there are 5 shells and a ball that is hidden behind
Image of page 2
Image of page 3
This is the end of the preview. Sign up to access the rest of the document.

{[ snackBarMessage ]}

What students are saying

  • Left Quote Icon

    As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

    Student Picture

    Kiran Temple University Fox School of Business ‘17, Course Hero Intern

  • Left Quote Icon

    I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

    Student Picture

    Dana University of Pennsylvania ‘17, Course Hero Intern

  • Left Quote Icon

    The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

    Student Picture

    Jill Tulane University ‘16, Course Hero Intern