You and a friend are in a car and you are looking for a park

You and a friend are in a car and you are looking for a parking space in a city you are visiting. The most convenient parking space is in a residential area and there\'s a sign indicating a fine for non-residents. Suppose the expected value of parking illegally is high and you start to park the car. Your friend objects, \"We shouldn\'t park there.\" Is your friend being irrational? Why or why not?

Solution

If for parking illegally fine is very high, then let us calculate the expected value

Suppose parking legally has a fee of p, and non parking a fine of f,

then prob of being fined = 0.5 (say)

Then Expected value of your charges = -0.5p+0.5f

As f is very high this seems that you have to lose money more likely

So your friend is rational.