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You are booking international flights for a holiday. The cost of a return economy non-refundable flight is $2,400 compared to a fully refundable ticket which

You are booking international flights for a holiday. The cost of a return economy non-refundable flight is $2,400 compared to a fully refundable ticket which costs $3,200. You estimate the odds are 1:7 that you will need to cancel your flight. (a) Draw the corresponding decision tree. (b) Determine the best decision and the expected cost associated with that decision. (c) How much would the refundable ticket need to cost for the expected utility of both options to be equal? (d) Draw the "flipped" tree (of that from part (a)) and calculate the EVPI. (e) Explain what EVPI means in this case

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Answer a Decision Tree Fly 10 Cancel 17 Dont Cancel 67 Refundable 3200 NonRefundable 2400 b Best Decision and Expected Cost Expected Cost of Refundabl... blur-text-image

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