Computing Lost Profits in Business Interruption Litigation: A General Model

Stephenson Stanley, David Macpherson and Prakash-Canjels Gauri
Additional contact information
Stephenson Stanley: Litigation Economics LLC
Prakash-Canjels Gauri: Kenrich Group

Journal of Business Valuation and Economic Loss Analysis, 2012, vol. 7, issue 1, 18

Abstract: This paper focuses on business interruption litigation and how to compute lost profits as a remedy. The main contribution of the paper is development of a general model of economic damages which assesses lost profits by measuring the incremental changes in revenue, variable costs, and fixed costs. Prior treatments can be understood as special cases to this general model. Several sources of economic damages can now be considered due to business interruption, including changes in prices, quantity sold, variable cost structures, fixed costs, and extraordinary expenses. We also offer case examples using the proposed framework and provide practitioners with suggestions for damages estimation.

Keywords: business interruption; damages; lost profits (search for similar items in EconPapers)
Date: 2012
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DOI: 10.1515/1932-9156.1118

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