Homework Help is Here – Start Your Trial Now!
Business
Finance
(a) Determine the villager's optimal fishing strategy if they know that the current runs at random 60% of the time and fails to run the remaining 40% of the time.

(a) Determine the villager's optimal fishing strategy if they know that the current runs at random 60% of the time and fails to run the remaining 40% of the time.

Essentials Of Investments
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
See similar textbooks
icon
Related questions
Question
The economy of a small, remote village located on an island off the coast of Africa is based on fishing the waters of the local seas. Individuals who fish the waters typically choose between one of three fishing routes: The inside route, which consists of fishing the waters 0-5 miles from shore; the middle route, which consists of fishing the waters 5-15 miles from shore; and the outside route; which consists of fishing the waters 15-25 miles from shore. The primary obstacle to the villagers is the current of the local seas, which is unpredictable over even short time intervals and makes fishing the outside route incredibly dangerous when it (the current) runs. While fishing the outside route is dangerous on account of the current, the inside route is largely protected from the current. The value of fishing the outside route is in the quality (in both variety and size) of the fish-driving the value of the fish available from the inside and middle routes down at the local markets that are available when the current does not run. The average value of the fish from fishing each route-accounting for the costs of the route depending on whether the current runs are provided below. • Inside route: $1200 dollars when the current runs and $0 when the current does not run. • Middle route: $900 when the current runs and $600 when the current does not run. • Outside route: A loss of $1200 when the current runs and a gain of $1500 when the current does not run. (a) Determine the villager's optimal fishing strategy if they know that the current runs at random 60% of the time and fails to run the remaining 40% of the time.
Transcribed Image Text:The economy of a small, remote village located on an island off the coast of Africa is based on fishing the waters of the local seas. Individuals who fish the waters typically choose between one of three fishing routes: The inside route, which consists of fishing the waters 0-5 miles from shore; the middle route, which consists of fishing the waters 5-15 miles from shore; and the outside route; which consists of fishing the waters 15-25 miles from shore. The primary obstacle to the villagers is the current of the local seas, which is unpredictable over even short time intervals and makes fishing the outside route incredibly dangerous when it (the current) runs. While fishing the outside route is dangerous on account of the current, the inside route is largely protected from the current. The value of fishing the outside route is in the quality (in both variety and size) of the fish-driving the value of the fish available from the inside and middle routes down at the local markets that are available when the current does not run. The average value of the fish from fishing each route-accounting for the costs of the route depending on whether the current runs are provided below. • Inside route: $1200 dollars when the current runs and $0 when the current does not run. • Middle route: $900 when the current runs and $600 when the current does not run. • Outside route: A loss of $1200 when the current runs and a gain of $1500 when the current does not run. (a) Determine the villager's optimal fishing strategy if they know that the current runs at random 60% of the time and fails to run the remaining 40% of the time.
Expert Solution
steps

Step by step

Solved in 3 steps

SEE SOLUTIONCheck out a sample Q&A here
Blurred answer
Knowledge Booster
Ethical Decision Making
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.
Similar questions
Recommended textbooks for you
Essentials Of Investments
Essentials Of Investments
Finance
ISBN:
9781260013924
Author:
Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:
Mcgraw-hill Education,
FUNDAMENTALS OF CORPORATE FINANCE
FUNDAMENTALS OF CORPORATE FINANCE
Finance
ISBN:
9781260013962
Author:
BREALEY
Publisher:
RENT MCG
Financial Management: Theory & Practice
Financial Management: Theory & Practice
Finance
ISBN:
9781337909730
Author:
Brigham
Publisher:
Cengage
Foundations Of Finance
Foundations Of Finance
Finance
ISBN:
9780134897264
Author:
KEOWN, Arthur J., Martin, John D., PETTY, J. William
Publisher:
Pearson,
Fundamentals of Financial Management (MindTap Cou…
Fundamentals of Financial Management (MindTap Cou…
Finance
ISBN:
9781337395250
Author:
Eugene F. Brigham, Joel F. Houston
Publisher:
Cengage Learning
Corporate Finance (The Mcgraw-hill/Irwin Series i…
Corporate Finance (The Mcgraw-hill/Irwin Series i…
Finance
ISBN:
9780077861759
Author:
Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor
Publisher:
McGraw-Hill Education
SEE MORE TEXTBOOKS