Question: An entrepreneur applies Bayesian decision-making, to maximize the expected payoff. In a decision problem to solve, s/he considers the following payoff table. State of

An entrepreneur applies Bayesian decision-making, to maximize the expected payoff. In a decision problem to solve, s/he considers the following payoff table. State of Nature Alternative s1 s2 $3 al 3x 45 15 a2 25 50 70 3 35 5x 40 0.4 0.2 0.4 SON Probabilities In the payoff table, x>0 is a parameter of the decision problem that can be increased at a certain cost to be paid by the entrepreneur. (Observe that if x increases, then several payoff table entries increase.) Currently, the value of x is set at 50. What is the maximal amount that the decision maker could reasonably spend, in order to increase x to 75?

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