Consider that you own rights to a plot of land under which there may or may not be oil. You are considering three alternatives: doing nothing ("don't drill"), drilling at your own expense of $500,000, and "farming out" the opportunity to someone who will drill the well and give you part of the profit if the well is successful. You see three possible states of nature: a dry hole, a mildly interesting small well, and a very profitable gusher. You estimate the probabilities of the three states of nature and the nine outcomes as shown in Table