A financial executive lives in Ottawa but must travel to Toronto frequently. She can go to Toronto by car, train, or plane. The cost for a plane ticket from Ottawa to Toronto is $285, and it is estimated that the trip takes 65 minutes in good weather and 70 minutes in bad weather. The cost for a train ticket is $190, and the trip takes four hours in good weather and 4 hours and 10 minutes in bad weather. The cost to drive her own car from Ottawa to Toronto is $70, and this trip takes four hours in good weather and five in bad weather. The executive places a value of $75 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?