Applying the Kelly Criterion to Lawsuits
by Tristan Barnett
Abstract: This article analyzes the risks and rewards involved in the litigation process, and whether it is beneficial for a victim to file a lawsuit against the injurer given there are risks involved if unsuccessful in court. The analysis can be used to determine whether a victim should have legal representation in court to obtain a higher expected payout, or minimize risk through legal costs by representing themselves in court, even though the expected payout is reduced without legal representation.
Analysis is given to obtain insights as to how much a victim should accept in an out-of-court settlement and a â€œfairâ€ arbitration value between the two parties in dispute. A working example from an employment dispute is given to demonstrate the methodology.
Dr Tristan Barnett is an Adjunct Lecturer at Victoria University, with a research focus on casino mathematics, sport statistics and game theory.
His real world experiences consist of setting bookmaker prices for Ladbrokes and Centrebet, performance modelling for Tennis Australia and the Western Bulldogs Football Club, playing blackjack and online gambling for profit, and currently work as a sports statistician for Cadability, an online sports multimedia organization. Dr Barnett is also Managing Director for Strategic Games, an online site focusing on academic material on the mathematics of sport and gambling.
Media Release â€“ A fair deal in law is on the cards http://www.vu.edu.au/media/media-releases/a-fair-deal-in-law-is-on-the-cards
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