Question

In a product liability case, a company can settle out of court for a loss of $350,000, or go to trial, losing $1,100,000 if found guilty and nothing if found not guilty. Lawyers for the company estimate the probability of a not-guilty verdict to be 0.8. Should the company settle out of court?

Answer 1

probability of a not-guilty verdict = 0.8.
so whats probability of a guilty verdict =?

Answer 2

.2

Answer 3

if guilty company would loose $1,100,000
so what is 0.2 * losing $1,100,000=?

Answer 4

I would definitely go to trial if I had that Kind of change for a non guilty verdict.

Answer 5

SO does the 350000 have nothing to do with the question?

Answer 6

350000 will come into consideration later

Answer 7

*chance

Answer 8

-220000

Answer 9

0.2 * $1,100,000=?

Answer 10

now if the company goes on trial , it will loose $220000 with probability 0.2
where as if it doesn't go for trial, it will surely loose $350,000

Answer 11

now compare

Answer 12

so go to trial

Answer 13

as 350000> 220000, yes, go for trial

Answer 14

thanks!

Answer 15

welcome ^_^