Erica is going to fly to London on August 5th and return home on August 20th. It is now July 1st. On July 1st, she may buy a one-way ticket (for $350) or a round-trip ticket (for $660). She may also wait until August 1st when a one-way ticket will cost $370 and a round-trip ticket $730. It is possible that between July 1st and August 1st, her sister (who works for the airline) will be able to obtain a free one-way ticket for Erica. The probability that her sister will obtain the free ticket is 0.3. If Erica has bought a round trip ticket on July 1st and her sister has obtained the free ticket, she may return “half” of her round-trip to the airline. In this case her total cost will be $330 plus a penalty of $50. Use a decision tree to determine Erica’s lowest expected cost of obtaining a round-trip ticket to London.
Erica is going to fly to London on August 5th and return home on August 20th. It is now July 1st. On July 1st, she may buy a one-way ticket (for $350) or a round-trip ticket (for $660). She may also wait until August 1st when a one-way ticket will cost $370 and a round-trip ticket $730. It is possible that between July 1st and August 1st, her sister (who works for the airline) will be able to obtain a free one-way ticket for Erica. The probability that her sister will obtain the free ticket is 0.3. If Erica has bought a round trip ticket on July 1st and her sister has obtained the free ticket, she may return “half” of her round-trip to the airline. In this case her total cost will be $330 plus a penalty of $50. Use a decision tree to determine Erica’s lowest expected cost of obtaining a round-trip ticket to London.
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