Janus Seagull had a car accident and was out of work for a year. Janus believes that the accident was caused by a vehicle defect. He consulted some lawyers and planned to sue the vehicle manufacturer. During negotiations, the legal team of the vehicle manufacturer offered a $700K settlement. However, Janus needs to settle the $100K in legal fees. Janus asked his lawyer for advice and the lawyer told him that he has a 50% chance of winning the case. If Janus loses, he will incur legal fees of $75K. If he wins, the full requested s
Janus Seagull had a car accident and was out of work for a year. Janus believes that the accident was caused by a vehicle defect. He consulted some lawyers and planned to sue the vehicle manufacturer. During negotiations, the legal team of the vehicle manufacturer offered a $700K settlement. However, Janus needs to settle the $100K in legal fees.
Janus asked his lawyer for advice and the lawyer told him that he has a 50% chance of winning the case. If Janus loses, he will incur legal fees of $75K. If he wins, the full requested settlement is also not guaranteed. The lawyer believes that there is a 50% chance that Janus will receive full settlement of $3 million, of which Janus needs to settle $1 million in legal fees. There is a 50% chance that the jury will award Janus $1 million, of which 50% will be taken up by legal fees.
What you need to do:
1) Use a decision tree to determine what is Janus’ best option. You need to show the complete decision tree in your submission.
2) Recommend Janus’ best option and explain your why this is so.
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