and Donald disagree on the interpretation of a business contract. Peter believes Donald owes him $20,000 and Donald believes he owes nothing. Each has been advised by his attorn cost of litigating the case will be $2,000 each. What is Peter's threat value?

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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Peter and Donald disagree on the interpretation of a business contract. Peter believes Donald owes him $20,000 and Donald believes he owes nothing. Each has been advised by his attorney that there is a 60% chance that Peter will prevail in a lawsuit.
The cost of litigating the case will be $2,000 each. What is Peter's threat value?
Transcribed Image Text:Peter and Donald disagree on the interpretation of a business contract. Peter believes Donald owes him $20,000 and Donald believes he owes nothing. Each has been advised by his attorney that there is a 60% chance that Peter will prevail in a lawsuit. The cost of litigating the case will be $2,000 each. What is Peter's threat value?
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The expected value of threat depends on the probability of threat and that depends on the legal expenses involved in that.

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