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In your second example, wouldn't "loser pays" make the plaintiff more likely to persue, since he is likely to recover the $5000 in damages from the landlord who
by vortico 10y ago
In your second example, wouldn't "loser pays" make the plaintiff more likely to persue, since he is likely to recover the $5000 in damages from the landlord who took $1500 for no reason?
- mattkrause 10y agoImagine that the case is pretty good, but not airtight--let's say there's 2:1 odds, or a 75% chance, that you recover your money. The expected value of the lawsuit is therefore (0.751500) + (0.25-5000) = -$125, which means that very few people will go after the crooked landlord. If the leasing company has deep pockets, they could slant the outcome even further in their favor. Spend $10,000 instead and the expected value is now -$1,375. This seems wrong. On top of this, you also have to worry about the risk of ruin. Imagine a bet where Bill Gates pays you $15M if a coin comes up heads, but you pay him $10M if it comes up tails. This bet has a positive expected value (+$5M), but most people won't take it because the losing outcome is completely devastating (unless someone rich is backing you). I wonder if anywhere has a rule where the winning side receives min(loser's cost, winner's cost). That seems like it might be reasonably fair (if you can keep both sides from cooking the books).
- sokoloff 10y agoSuch a debt (to Bill Gates) would be dischargeable in bankruptcy, so most poor people should take that bet. (Also, the +EV is $2.5MM, not $5MM.)