Decision Tree

Accept Johns Offer ($750,000)

750

John accept counter offer 400 0.1 1 Allied Loses (Damages $750000) 0.5 3 Allied Wins (Damages none) 0.2 Allied Loses (Damages $1500000) 0.3 1500

Reject Johns Offer Counteroffer $400,000

John Reject counter offer 0.4

750 0 600

Allied Accepts offer John offers $600000 0.5 Allied Rejects offer 5

Allied Loses (Damages $1500000) 0.3 1500 Allied Loses (Damages 0.5 $750000) 750 Allied Wins (Damages none) 0.2 0

Expected Value calculations: EV (node 1): 670 EV (node 2): 400*.1 + 825*.4 + 600*.5 = 670 EV (node 3): 1500*.3 + 750*.5 + 0*.2 = 825 EV (node 4):600 EV (node 5): 1500*.3 + 750*.5 + 0*.2 = 825

Decision Tree with branches of optimal expected values only: