A friend of yours is in the market for a new computer. Four different machines are under consideration. The four computers are essentially the same, but they vary in price and reliability. The least expensive model is also the least reliable, the most expensive is the most reliable, and the other two are in between.
a. Describe to your friend how you would approach the decision.
b. Define reliability in a way that would be appropriate for the decision. Do you need to consider risk?
c. How might your friend go about establishing a marginal rate of substitution between reliability and price?