Question

Tom knows that the title insurance company made a mistake on his property title. Because of their mistake, his neighbor now has access to an easement road through the 25 acres located at the back of his property. He can't use the acreage for pasture, because his neighbor insists that the gates remain open. The title company has offered a $40,000 settlement. Tom has decided to take the settlement rather than possibly lose in court if he were to sue the title company for more money. Tom's decision is based on ________.

Answer 1

risk aversion.

Step-by-step explanation:

Have you ever heard "A bird in the hand is worth two in the bush"?

It relates to safe investments or activities that yield known returns, instead of simply trying to go after more birds that you might or might not catch.

Tom knows that he can sue the title company and earn a lot of money, but he also knows that he might lose the case and instead of getting some money will have to spend a lot of his money in legal fees. Since he dislikes the risk of losing both the suit and his own money, he decided to accept the company's settlement.