What should you do to minimize the expected expense

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Unformatted text preview: at 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. 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 o...
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This note was uploaded on 03/18/2014 for the course MGMT 15.053 taught by Professor Jamesorli during the Spring '07 term at MIT.

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