Download Analysis of Liability, Damages, and Litigation Costs in Settlement and Fee Shifting and more Study notes Civil procedure in PDF only on Docsity! Suit and Settlement Problems 1. Plaintiff and defendant agree that defendant is liable, but they disagree on the amount of damages. Plaintiff thinks that damages are $9000, and defendant thinks damages are $8000. Assuming zero litigation costs and risk neutrality, will the parties settle? Why or why not? 2. Same as 1, except now plaintiff thinks that damages are $8000, and defendant thinks damages are $9000. 3. Same as 1, except each party must incur $1000 in costs to take the case to trial. What does this suggest about the relationship between litigation costs and settlement? 4. Same as 1, except each party's litigation costs are only $250. 5. Plaintiff and defendant agree that damages are $10,000. They are uncertain, however, about liability. Plaintiff thinks that his probability of prevailing is 0.6 (60%), and defendant thinks that plaintiff's probability of prevailing is only 0.4 (40%). Assuming zero litigation costs and risk neutrality, will the parties settle? Why or why not? What does this suggest about uncertainty and settlement? 6. Same as 5, except litigation costs are $500 each. 7. Same as 5, except litigation costs are $1500 each. 8. If one made the more realistic assumption that parties are risk averse, how would that affect problems 5-7? 9. Plaintiff is considering suit. Plaintiff and defendant agree that damages are $1000 and that the plaintiff has a 75% chance of prevailing. Litigation costs are $1000 for each party. Assuming that the parties are risk neutral, if plaintiff sues, will the parties settle? Will the plaintiff sue? What does this suggest about litigation costs and suit? 10. Same as 9 except litigation costs are only $800. Bonus. Plaintiff thinks there is a 25% chance defendant will be found not liable, a 25% chance that defendant will be found liable for $10,000 in damages, a 25% chance that defendant will be found liable for $50,000 in damages, and a 25% chance that defendant will be found liable for $100,000 in damages. Defendant, on the other hand, thinks there is a 40% chance that it will be found not liable, a 20% chance that it will be found liable for $10,000, a 20% chance that it will be found liable for $50,000, and a 20% chance that it will be found liable for $100,000. Each party must incur $30,000 to bring the case to trial. Will the parties settle? Why or why not? Docsity.com
