If a defendant believes there is a 60 percent chance that the plaintiff will win $400,000 and a 40 percent chance the plaintiff will lose and receive nothing (zero)and the defendant's litigation cost is $150,000, what is the defendant's expected loss from the litigation?

Question

Quizplus · Accepted Answer

The expected loss is calculated by multiplying the probability of each outcome by its respective cost and then adding the litigation cost. So, (0.6 * $400,000) + (0.4 * $0) + $150,000 = $240,000 + $0 + $150,000 = $390,000.

If a Defendant Believes There Is a 60 Percent Chance