Question
I am going to fly to San Francisco on December 8 th and return home on December 11 th . My travel agent tells me
I am going to fly to San Francisco on December 8th and return home on December 11th. My travel agent tells me that I could buy a one-way ticket today for $350 or a round-trip ticket for $660. If I wait until December 1st to buy, a one-way ticket will cost $370 and a round-trip ticket will cost $730. It is possible that before December 1st, my aunt (who works for the airline) will be able to obtain a free one-way ticket for me back home. If she cannot get the ticket for free, the one-way ticket will cost $370. The probability that my aunt will obtain the free ticket is 0.3. If I bought a round-trip ticket today and my aunt has obtained a free ticket, I may return "half" of my round-trip to the airline. In this case, my total cost will be $330 plus a $50 penalty.
- Use the tree from part a) to determine my best course of action. What should I do and when? What is the expected cost of my obtaining round-trip transportation to San Francisco?
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