A defendant believes there is a 70 percent chance that the plaintiff will win $800,000 and a 30 percent chance that the plaintiff will lose and be awarded nothing (zero). The plaintiff believes that there is a 90 percent chance that they will win $800,000 and a 10 percent chance that they will be awarded nothing (zero). The plaintiff's litigation cost is $300,000 and the defendant's litigation cost is $200,000. What is the plaintiff's expected value from the litigation?

Question

Quizplus · Accepted Answer

The plaintiff's expected value is calculated as: (0.9 * $800,000) - $300,000 = $720,000 - $300,000 = $420,000.

A Defendant Believes There Is a 70 Percent Chance That