I drive to school and am currently looking for a parking spot soI can walk to Jacob's. If I turn into a parking lot to look for aspot to park in that specific lot, the process of looking for aspot takes 1 minute of time whether I find a spot ornot.Ă‚Â Ă‚Â
Parking lot A is closest to Jacobs. If I get a spot here, ittakes me 1 minute to walk into my class at the business school,however there is only a 10% chance I'll find a spot if I look.
Parking lot B is a 4-minute walk; if I pull in to look for aspot, there is a 30% chance I'll find a spot.
Parking lot C is an 8-minute walk; if I pull in to look for aspot, there is a 100% chance I will find a spot.Ă‚Â Ă‚Â
Which strategy to find a parking spot is best for me (ie. whichorder should I check the parking lots for spots to park), assumingwe are risk-neutral, and simply want to have the earliestexpected arrival time to Jacob’s as possible?(Another way to say this is we want the smallest expected value oftime spent getting to Hall).
Now, assume I am risk averse (let’s say that in this secondcase, my class starts in 10 minutes, and there is a large decreasein my utility if I am late for class). Is the best strategy thesame as when I am risk-neutral, or has it changed?
