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Homework answers / question archive / Question 16 Jessica manufactures components for a product
Question 16
Jessica manufactures components for a product. She has sued one of her customers, Michael, in the United States for payment. Michael claims that the components that Jessica delivered were defective. They are now negotiating a possible settlement. Jessica is asking the court to award her 400,000 in damages and she agreed to pay her attorney a 30% contingency fee. There is a 50% chance that she will win. If they go to court, she estimates that Michael’s attorney’s fees will total 80,000. Based on a decision tree calculation, the value of Jessica’s litigation BATNA based only on these facts is
Answer:
140,000
Explanation:
Jessica manufactures components of products which she is selling to Michael. He claims that components manufactured by Jessica are defective. Jessica is claiming 400,000 for damages from court. There is 50% chance she will win. Based on these assumptions Jessica can get 140,000 value only. Using the decision tree we get,
400,000 * 50% = 200,000
There is 30% contingency fee so Jessica will get 70%
200,000 * 70% = 140,000
