A manager believes there is a 10 percent chance their firm will have to pay $500,000, a 20 percent chance that they will have to pay $400,000 and a 70 percent chance they will be found innocent and pay nothing except the legal fees of $100,000. If the manager chooses to not settle for $230,000 (pay the plaintiff)and to enter the litigation instead, which of the following is true?

Question

Quizplus · Accepted Answer

The manager's decision to enter litigation, despite the potential for higher costs, indicates a preference for risk over a certain loss of $230,000, which is characteristic of a risk lover.

A Manager Believes There Is a 10 Percent Chance Their