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[michelangelo]

A medical doctor is involved in a $1 million malpractice suit. He can either settle out of court for $250,000 or go to court. If he goes to court and loses, he must pay $825,000 plus $175,000 in court costs. If he wins in court the plaintiffs pay the court costs. Identify the states of nature of this decision-making problem.


Two choices: (1) go to court and (2) settle out of court.

Two possibilities: (1) win the case in court and (2) lose the case in court.

Four consequences resulting from Go/Settle and Win/Lose combinations.

The amount of money paid by the doctor.

[syvwkh]

a) if he settles out of court amount of money paid by him= $250,000
b) if he goes to court & loses amount of money paid by him
= $825,000 + $175,000 = $ 1000,000
c) if he goes to court & wins amount of money paid by him = $ 0
as involved in malpractice he might choose (a) option.

[byron92]

Yes