Let ! denote the plaintiffs assessment of her probability of winning at trial, and " denote the defendants assessment of this same probability. In other words, " is the defendants assessment of his probability of losing at trial. Let equals the monetary judgment that the plaintiff will recover if she wins. Let ! and " be the costs of trial for the plaintiff and defendant, respectively. 2.1 Derive the range of the amount of the settlements (S) 2.2 Derive the NO-TRIAL condition and use it to argue if pessimism encourages or discourages trail.

Question 3. ( 20 points) Let Pp denote the plaintiff's assessment of her probability of winning at trial, and Pa denote the defendants assessment of this same probability. In other words, Pa is the defendant's assessment of his probability of losing at trial. Let , equals the monetary judgment that the plaintiff will recover if she wins. Let Cp and Ca be the costs of trial for the plaintiff and defendant, respectively. 2.1 Derive the range of the amount of the settlements (S) 2.2 Derive the NO-TRIAL condition and use it to argue if pessimism encourages or discourages trail. Question 3. ( 20 points) Let Pp denote the plaintiff's assessment of her probability of winning at trial, and Pa denote the defendants assessment of this same probability. In other words, Pa is the defendant's assessment of his probability of losing at trial. Let , equals the monetary judgment that the plaintiff will recover if she wins. Let Cp and Ca be the costs of trial for the plaintiff and defendant, respectively. 2.1 Derive the range of the amount of the settlements (S) 2.2 Derive the NO-TRIAL condition and use it to argue if pessimism encourages or discourages trail