# Consider the following decision: You have an opportunity to buy an item worth \$1000 for \$900. You don’t have the money, but a friend is

Consider the following decision: You have an opportunity to buy an item worth \$1000 for \$900.
You don’t have the money, but a friend is willing to loan it to you. You are deciding whether to
borrowthe \$900. You told her you’d pay her back with \$150interest. She might tell you don’t have
to pay the money back, but even if she does you’ll still give her the \$900 back (but not the interest).
You don’t know the probability that she’ll tell you to keep your money. If you don’t borrow the
money, you won’t get the \$1000 item.
Consider the payoff table:

Consider the payoff table:
Acts
Friend will say don’t Friend will not say
States->
pay
don’t pay
Borrow from
\$1000-\$900 =
\$1000-\$1050 =
friend
\$100
-\$50
Don’t borrow
\$0
from friend
\$0
act is recommended by the maximin strategy?
Friend will not say don’t pay
Friend will say don’t pay
Don’t borrow from friend
Borrow from friend

(550 words)

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