Jane wants to buy a beautiful doll as a gift for her sister's birthday.She knows that the same product is offered in different shops with prices of $120, $100 and $80 with odds of 1/3 of each price.She just stopped at a shop and knows that the price is $100.Suppose that there is a search cost of $5 for each search.Should she search for one more time?

Question

Quizplus · Accepted Answer

The expected price of the doll is (1/3)*120 + (1/3)*100 + (1/3)*80 = $100. Since she already knows that the price is $100, she should not search for one more time.

Jane Wants to Buy a Beautiful Doll as a Gift