There are 2 coins in a bin. When one of them is flipped, it lands on heads with probability .6, and when the other is flipped, it lands on heads with probability .3. One of these corns is to be randomly chosen and then flipped. Without knowing which coin is chosen, you can bet any amount up to $10, and you then either win that amount if the coin comes up heads or lose it if it comes up tails. Suppose, however, that an insider is willing to sell you, for an amount C, the information as to which coin was selected. What is your expected payoff if you buy this information? Note that if you buy it and then bet x, you will end up either winning x − C or −x − C (that is, losing x + C in the latter case). Also, for what values of C does it pay to purchase the information?
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