Air Canada and United have for many years been members of the star alliance, selling seats on each others flights while competing for passengers. In 2011 they proposed closer collaboration. The Competition bureau blocked their proposition on the grounds it was uncompetitive. Air Canada rejected the competition bureaus decision and went before the competition tribunal for a decision. Since this was an unusual case, it was tough to predict the outcome and some lawyers put it at 50/50.
Suppose the following table represents the increase to Air Canadas profits under "good" or "bad" economic conditions which have a probability of 0.3 and 0.7, respectively.
Tribunal outcome: Win +840m +210m
Lose +150m -500m
i) what is the expected increase in profits to Air Canada?
ii) what is the variance of the increase in profits to Air Canada?
iii) how do answer to i) and ii) compare to just accepting the competition bureaus decision?
iv) is it worth Air Canada spending 32 m on lawyer fees to fight the case?
for i) I used Expected value = sum x * P(x) = E(x)= 840,000,000 (0.3) + 210,000,000 (0.7) = 399,000,000. I don't know how to do the rest or if I'm on the right track