Goal is to minimize his total expected cost for the summer

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During the summer, Olympic swimmer Adam Johnson swims every day. On sunny summer days, he goes to an outdoor pool, where he may swim for no charge. On rainy days, he must go to a domed pool. At the beginning of the summer, he has the option of purchasing a $15 season pass to the domed pool, which allows him use for the entire summer. If he doesn't buy the season pass, he must pay $1 each time he goes there. Past meteorological records indicate that there is a 60% chance that the summer will be sunny (in which case there is an average of 6 rainy days during the summer) and a 40% chance the summer will be rainy (an average of 30 rainy days during the summer).

Before the summer begins, Adam has the option of purchasing a long-range weather forecast for $1. The forecast predicts a sunny summer 80% of the time and a rainy summer 20% of the time. If the forecast predicts a sunny summer, there is a 70% chance that the summer will actually be sunny. If the forecast predicts a rainy summer, there is an 80% chance that the summer will actually be rainy. Assuming that Adam's goal is to minimize his total expected cost for the summer, what should he do? Also find EVSI and EVPI.

Reference no: EM131433921

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