Working towards a deterrence formula.

Similar disclaimer to the prior post - I take none of the following seriously, and do not believe you should either.

OK. So this is what I get.

First. The cost of not getting sued is equal to:

((Probability of not having an accident) * (Probability of no fraudulent suit)

PLUS
(Probability of having an accident) * (Probability of no victim suit))
TIMES
Cost of the Precaution.

Then, in each of the four lawsuit states (accident + suit + verdict; accident + suit + acquittal; no accident + suit + verdict; no accident + suit + acquittal) you add the cost of the burden.

So the formula is going to include 4B.

In both verdict states, the total cost is equal to the maximum cost of liability + the maximum cost of litigation.

So, the formula is going to include 2(L_max + S_max)

Also, each acquittal state is going to equal the maximum cost of litigation. So, that's 2(S_max)

2(L_max + S_max) gets multiplied by the probablity of an accident + the probability of getting sued by a victim TIMES the probability of not having an accident + the probability of getting sued by a fraud.

The same can be said for 2(S_max).

OK. So we can narrow the number of variables.

Let v be the probability of getting sued by an honest victim.

Let f be the probability of getting suted by a fraud.

Let a be the probability of an accident.

Let j be the probability of a just verdict (you lose because you hurt the guy)

Let i be the probability of an unjust verdict (you lose despite causing no harm)

Let B be the cost of a burden.

Let S be the maximum cost of a litigation.

And let L be the maximum cost of potential liability.

2 * ( L + S ) * ( avj + ( fi - afi ) )
PLUS
2S (( av - avj ) + ( f - fa - fi + fai )
PLUS
4B
PLUS
B * ( ( 1 - a - f + af ) + ( ( a - av ) )

My head hurts, and I think I messed something up in here.

Let's check it.

Total Cost = (2 * ( L + S ) * ( avj + ( fi - afi ) )) + (2S (( av - avj ) + ( f - fa - fi + fai )) + 4B + (B * ( ( 1 - a - f + af ) + ( ( a - av ) ))

I'm such a dumbass. I know how to use Excel.