Question 1 (3 points)

Stacy Ennis eats lunch at a local restaurant two or three times a week. In selecting a restaurant, Stacy uses three criteria. First is to minimize travel time, which means that close-by restaurants are preferred on this attribute. The next objective is to minimize cost, and Stacy can make a judgment of the average lunch cost at most of the restaurants that would be considered. Finally, variety comes into play. On any given day, Stacy would like to go someplace different from where she has been in the past week. Suppose that today is Monday, her first day back from a two-week vacation, and Stacy is considering the following restaurants:

	Lowest Price, $	Average Price, $	Highest Price, $	Distance (min.s)
Sam's Pizza	3	3.5	5	10
Sy's Sandwiches	2.5	2.85	4	9
Bubba's Italian Barbecue	5	6.5	8	7
Blue China Caf	4	5	7	2
The Eating Place	5	7.5	10	2
The Excel-Soaring Restaurant	7	9	12	5

Assume that all prices are equally likely for each restaurant.

(a) If Stacy considers distance, price and variety to be equally important (given the range of alternatives available), where should she go today for lunch?

(b) Given your answer to part (a), where should Stacy go on Thursday?

Stacy has just returned from vacation and thus she has been out of town. Since variety objective makes a difference only when Stacy visits a restaurant in the past week, we disregard this objective at this point. Then, since distance and price are equally important, their weight should be 0.50.

Next, with two remaining objectives, the decision tree looks as follows:

Now, we need to assign scores to each consequence. As far as the price is concerned $2.5 yields a score of 100 and $12 yields a score of 0. Then by linear interpolation, we could assign a score to each price level using the formula (12 X)/(12 2.5) * 100. Keep in mind, this formula is just a heuristic and is not necessarily relevant for all individuals/decision makers. But, lets assume this is what represents Stacys preferences.

For the distance attribute, we assign a score of 100 to 2 minutes and 0 to 10 minutes. Then a score for the distance attribute would be computed using a similar formula (10 Y)/(10 2) * 100.

Then the updated Sam's Pizza decision tree would like

Using the price level formula (12 X)/(12 2.5) * 100, we can calculate Lowest Price of Sam's Pizza as: (12 - 3)/(12-2.5) * 100 = 94.74. Similarly, Average Price of Sam's Pizza as (12 - 3.5)/(12-2.5) * 100 = 89.47.

In order to answer part (a) and part (b), complete the rest of the tree using price level formulas and distance formula. Then, calculate the EMVs to make your final decision.