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2. A risk-neutral plaintiff in a lawsuit is deciding whether to settle a claim or go to trial. The defendants have offered a $100,000 settlement. a. If the plaintiff does not settle, she believes that the probability of winning at trial is 65%. If the plaintiff wins, she is awarded X dollars. If she loses her payoff is $0. How large must X be in order for the plaintiff to turn down the settlement offer? b. (15 Points) Suppose instead that the plaintiff is risk-averse, with a utility function of u(x)-Vx. If the plaintiff does not settle she believes that the probability of winning at trial is 650%. If she wins she is awarded X dollars. If she loses her payoff is $0. How large must X be in order for the plaintiff to turn down the settlement offer? Is this number smaller or larger than that in part a)? Why?A risk-neutral plaintiff in a lawsuit is deciding whether to settle a claim or go to trial. The defendants have offered a $100,000 settlement.

If the plaintiff does not settle, she believes that the probability of winning at trial is 65%. If the plaintiff wins, she is awarded X dollars. If she loses her payoff is $0. How large must X be in order for the plaintiff to turn down the settlement offer?

(15 Points) Suppose instead that the plaintiff is risk-averse, with a utility function of . If the plaintiff does not settle she believes that the probability of winning at trial is 650%. If she wins she is awarded X dollars. If she loses her payoff is $0. How large must X be in order for the plaintiff to turn down the settlement offer? Is this number smaller or larger than that in part a)? Why?

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