If a plaintiff believes there is a 50 percent chance they will win $250,000 and a 50 percent chance they will win nothing (zero), and the litigation cost is $50,000, what is the expected value of the litigation for the plaintiff?

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Quizplus · Accepted Answer

The expected value of the litigation is the sum of the products of the possible outcomes and their probabilities. In this case, the possible outcomes are winning $250,000 and winning nothing (zero). The probability of winning $250,000 is 50%, and the probability of winning nothing is also 50%. The expected value is therefore:(0.5 * $250,000) + (0.5 * $0) = $125,000After subtracting the litigation cost of $50,000, the expected value of the litigation for the plaintiff is $75,000.

If a Plaintiff Believes There Is a 50 Percent Chance