Litigate or settle decision tree template

You have a settlement offer on the table. Court could pay far more, or nothing, and costs legal fees either way. This tree values the case from the claimant's side.

Best optionAccept the settlement offerExpected value 120,000 · 28,000 ahead of Go to court

The tree

Settle or go to court?−40k55%60%40%45%Settle or go to court?EV 120,000→ Accept the settlement offerAccept the settlement offer120,000Go to courtEV 132,000WinEV 240,000Full damages awarded300,000Reduced damages150,000Lose0

The decision in plain words

The options

Accept the offer, a certain amount now, or go to court, which costs fees up front and then depends on winning and on how much the court awards.

The uncertainties

Whether you win, and if you do, whether the award is full or reduced. Both are estimates your lawyer can refine, and the tree shows how much they matter.

The numbers

The settlement is a fixed payoff. Court has a fee as a branch cost and three possible outcomes. Move the win probability to see the point where court becomes worth it.

The result

Accept the settlement offer, with an expected value of 120,000, 28,000 ahead of Go to court.

Where it flips. If the chance of win under Go to court rises above 66.7% (it is 55% now), Go to court wins instead.

Chance of a loss
0%
Best case
120,000
Worst case
120,000

Change these numbers first

  • The payoff for accept the settlement offer: the answer flips at 92,000 (now 120,000).
  • The chance of win under Go to court: the answer flips at 66.7% (now 55%).
  • The chance of lose under Go to court: the answer flips at 33.3% (now 45%).

The closer a switch point is to your estimate, the more that estimate deserves a second look.

The tree as text

# Analytical, from the claimant's side
Settle or go to court?
  Accept the settlement offer: 120000
  Go to court (cost 40000) # legal fees
    Win (p 0.55)
      Full damages awarded (p 0.6): 300000
      Reduced damages (p 0.4): 150000
    Lose (p 0.45): 0

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Go deeper

Make this decision your own.

Open the template, change the options and numbers, and the best option updates as you type.