Patricia Is Researching Venues For A Restaurant Business

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Patricia is researching venues for a restaurant business. She is evaluating three major attributes that she considers important in her choice: taste, location, and price. The value she places on each attribute, however, differs according to what type of restaurant she is going to start. If she opens a restaurant in a suburban area of Los Angeles, then taste is the most important attribute, three times as important as location, and two times as important as price. If she opens a restaurant in the Los Angeles metropolitan area, then location becomes three times as important as taste and two times as important as price. She is considering two venues, respectively, a steak restaurant and a pizza restaurant, both of which are priced the same.…show more content…
3. Which option should she pursue if the probability of finding a restaurant venue in a suburban area can be reliably estimated as 0.7 and in a metropolitan area as 0.3? Describe your reasoning and show your calculations. Suburban area: steak restaurant utility= 0.7*0.0477=0.03339 Pizza restaurant utility=0.7*0.0467=0.03269 Metropolitan area: steak restaurant utility=0.3*0.0477=0.01431 Pizza restaurant utility=0.3*0.0467=0.01401 Starting a pizza restaurant in the suburban area is more favorable. This is because it has the highest utility compared to all the other options. 4. Provide a description of a scenario in which this kind of decision between two choices, based on weighing their underlying attributes, applies in the “real-world” business setting. Furthermore, what are the benefits and drawbacks, if any, to this method of decision making? Such a scenario may happen when one wants to start a retail business but where the market is high; the business is likely to be affected by adverse weather conditions whereas the best place to locate the business has least market though the price of the commodity in question is constant. The benefit of this may be choosing a way of attracting more market such as offering discounts at a particular quantity bought. There may be also a drawback as the discounts may not automatically attract customers hence leading to a loss. Problem 2: The demand function for Newton’s Donuts has been estimated as

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