A financial executive for Fidelity Investments lives in Boston but frequently must travel to
New York. She can go to New York by car, train, or plane. The cost for a plane ticket from
Boston to New York is $200, and it is estimated that the trip takes 30 minutes in good
weather and 45 minutes in bad weather. The cost for a train ticket is $100, and the trip
takes an hour in good weather and two hours in bad weather. The cost to drive her own car
from Boston to New York is $40, and this trip takes three hours in good weather and four in
bad weather. The executive places a value of $60 per hour on her time. The weather forecast
is for a 60% chance of bad weather tomorrow. What decision would you recommend?
(Hint: Set up a payoff table, and remember that you want to minimize costs.) What is the
expected value of perfect information?