The Expected Value of Litigation for Both Firms a and B

question 21

Essay

The expected value of litigation for both firms A and B both is $300,000 in favor of Firm A. The court costs for A and B are $50,000 and $75,000, respectively.
(a) Determine the range of out-of-court settlements for Firms A and B.
(b) What does the range calculated in part (a) mean?
(c) How would the range be affected by introducing conflicting assessments? Specifically,suppose each side believes its own winning chance is 70%.
(d) When would an out-of-court settlement be impossible?

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