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Decision Tree — Settle, Counter-Offer or Go to Trial

A plaintiff's litigation tree net of US$350k trial costs: countering at $1.6M rolls back to $1,164k, just ahead of accepting the $1,100k offer and well ahead of an immediate trial at $929k — while the cumulative profile shows the 29% chance of a net loss that buys that margin. Illustrative values, not legal advice.

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Accept the US$1.1M settlement offer or go to trial?Accept the US$1.1M settlement offer or go to trial?Plaintiff's expected net recovery, US$ thousands, after legal costs2 decisions · 5 chance nodes · 11 outcomes · maximise expected valueOPTIMAL FIRST CHOICECounter-offer at US$1.6M·EV $1,164kAccept US$1.1M nowReject and go to trialcost $350k · net $929kDrop the claimLiable0.55Not liable0.45High0.25Medium0.5Low0.25$1,100k$0LiabilityEV $1,279kDamages awardedEV $2,325k$4,000knet $3,650k$2,200knet $1,850k$900knet $550k$0net −$350kCounter-offer at US$1.6MAccepts the counter0.35Withdraws the offer0.65Go to trialcost $350k · net $929kLiable0.55Not liable0.45High0.25Medium0.5Low0.25Response to the offerEV $1,164kDefendant's replyEV $1,164k$1,600kP 0.35With no offer on the tableEV $929kLiabilityEV $1,279kDamages awardedEV $2,325k$4,000knet $3,650k · P 0.089$2,200knet $1,850k · P 0.179$900knet $550k · P 0.089$0net −$350k · P 0.292DecisionChanceOutcomeOptimal strategyRejected alternativeRisk profile·cumulative probability by first choice0%25%50%75%100%−$500k$0$500k$1,000k$1,500k$2,000k$2,500k$3,000k$3,500k$4,000kfinal outcome, net of costsFIRST CHOICEEVAccept US$1.1M now$1,100kσ $0 · worst $1,100kCounter-offer at US$1.6M$1,164kσ $1,186k · P(loss) 0.292Reject and go to trial$929kσ $1,417k · P(loss) 0.45What the rollback showsBest first choice: “Counter-offer at US$1.6M”, EV $1,164k — $64k ahead of the next best, “Accept US$1.1M now” ($1,100k).If the path reaches “With no offer on the table”: “Go to trial” ($929k) over “Drop the claim” ($0).Following it, the outcome ranges from −$350k to $3,650k across 5 possible results, standard deviation $1,186k; a 29% chance of a loss.Note: Trial costs US$350k in fees and expert witnesses; counsel puts the defendant's acceptance of US$1.6M at about one in three.Note: Illustrative values for a fictional dispute — not legal advice.

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title "Accept the US$1.1M settlement offer or go to trial?"
subtitle "Plaintiff's expected net recovery, US$ thousands, after legal costs"
currency $
unit k
risk-profile compare
note "Trial costs US$350k in fees and expert witnesses; counsel puts the defendant's acceptance of US$1.6M at about one in three."
note "Illustrative values for a fictional dispute — not legal advice."

decision "Response to the offer"
  "Accept US$1.1M now" -> 1,100
  "Counter-offer at US$1.6M" -> chance "Defendant's reply"
    "Accepts the counter" p 0.35 -> 1,600
    "Withdraws the offer" p rest
      decision "With no offer on the table"
        "Go to trial" cost 350 -> chance "Liability"
          "Liable" p 0.55 -> chance "Damages awarded"
            "High" p 0.25 -> 4,000
            "Medium" p 0.50 -> 2,200
            "Low" p rest -> 900
          "Not liable" p rest -> 0
        "Drop the claim" -> 0
  "Reject and go to trial" cost 350 -> chance "Liability"
    "Liable" p 0.55 -> chance "Damages awarded"
      "High" p 0.25 -> 4,000
      "Medium" p 0.50 -> 2,200
      "Low" p rest -> 900
    "Not liable" p rest -> 0