Problem
Suppose a worker currently resides in Pennsylvania and is deciding whether to remain there or to move to Illinois. There are three work periods left in the life cycle. If the worker remains in Pennsylvania, he will earn $20,000 per year in each of the three periods. If the worker moves to Illinois, he will earn $22,000 in each of the three periods. Finally, the worker's rate of discount is 10 percent. What is the highest level of migration costs that a worker is willing to incur and still make the move?