Question
21.If the plaintiff prevails at trial, she will obtain a judgment of $100,000.Her legal costs will be $10,000.She faces three types of defendants:those who lose
21.If the plaintiff prevails at trial, she will obtain a judgment of $100,000.Her legal costs will be $10,000.She faces three types of defendants:those who lose with a probability of 60%, those who lose with a probability of 50% and those who lose with a probability of 20%.Each group of defendants is equally likely.Defendant's legal costs, regardless of type, are $10,000.Plaintiff cannot tell which type of defendant she is facing and has to decide whether and how to pursue settlement negotiations.Settlement negotiations are costless.
a.If plaintiff faces a "big loser" defendant, her expected net benefit from trial is $50,000.
b.If plaintiff faces a "medium loser" defendant, her expected net benefit from trial is $50,000.
c.If plaintiff faces the "more successful" of the defendants, her expected benefit from trial is $20,000.
d.Regardless of what defendant type plaintiff faces, her expected benefit from trial is $43,333.
22.Same facts as question 21.If the plaintiff makes a settlement demand of $65,000
a.only the "20%" defendants will settle.
b.only the "50%" defendants will settle.
c.only the "60%" defendants will settle.
d.all defendants will settle.
e.no defendants will settle.
23.Same facts as 21 and 22.If the plaintiff demands
a.$30,000 to settle, all defendants will settle and the plaintiff's expected gain wouldbe $30,000.
b.$60,000 to settle, only the "20%" and "50%" defendants will settle and plaintiff's expected gain would be $43,333.
c.$70,000 to settle,only the "60%" defendants will settle and plaintiff's expected gain will be $40,000.
d.the optimal amount, defendants will still refuse to settle 20% of the time and there will be some trials.
e.all of the above.
f.none of the above.
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