Question: 1. Assume that discovery increases the optimism of plaintiffs and thus increases the value of their legal claims. Explain the consequences for the number of claims filed.
2. Trial procedures are formal and involve a lot of people, whereas discovery procedures are relatively informal and involve relatively few people. Consequently, discovering a fact before trial is cheaper than finding it during trial. Most trials, however, are averted through an out-of-court settlement. As a result, if the parties postpone finding a fact until trial, they may avoid the cost completely. To appreciate this trade-off between cost and certainty, consider a numerical problem. Let x denote the ratio of the cost of finding a fact during the trial and the cost of discovering the fact before trial. Assume that the probability of a settlement out of court equals .
3. How large must x be in order for the expected cost of finding the fact at trial to exceed the cost of discovering it before trial?