Decision Analysis for Restaurant Operation and Linear Programming for Digital Company

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Added on 2023-06-04

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This article discusses decision analysis for a restaurant operation and linear programming for a digital company. It covers various decision models and constraints used in the process. The optimal decisions are obtained using Maximin, Maximax, Minimax regret, Expected opportunity loss (EOL), and Expected monetary value (EMV) criteria. The article also includes a decision tree and breakeven cost analysis. The linear programming problem is solved using the solver function in Excel. The article concludes with the optimal units produced for each product to maximize profitability.

Decision Analysis for Restaurant Operation and Linear Programming for Digital Company

Added on 2023-06-04

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Decision Analysis for Restaurant Operation and Linear Programming for Digital Company_1

Q 1: Restaurant operation decision
 The payoff table
Alternatives Courses of nature
Franchise
opened
Franchise not
opened
Open an online
service
$3000 $6000
Serve a new
menu
$5000 $8000
Sell the
restaurant
$6000 $6000
Prob 0.6 0.4
Optimal decision under the various decision models
Decision making under uncertainty
1. Maximin approach
In this case the decision maker selects the maximum among the worst-case
outcomes
Alternatives Courses of nature
Franchise
opened
Franchise not
opened
Min
Open an online
service
$3000 $6000 $ 3000
Serve a new
menu
$5000 $8000 $5000
Sell the
restaurant
$6000 $6000 $ 6000
Prob 0.6 0.4
The optimal choice under this criterion is to sell the restaurant for $ 6000.

Decision Analysis for Restaurant Operation and Linear Programming for Digital Company_2

2. Maximax approach
Here the focus us on the best case possible. The maximum among the best options
is thereafter selected.
Alternatives Courses of nature
Franchise
opened
Franchise not
opened
Max
Open an online
service
$3000 $6000 $ 6000
Serve a new
menu
$5000 $8000 $ 8000
Sell the
restaurant
$6000 $6000 $ 6000
Prob 0.6 0.4
The optimal choice is therefore to improve the performance of the restaurant by
serving a new menu. This yield a profit of $ 8000 which is higher than any other
option.
3. Minimax regret approach
In this approach we first compute the regret table as indicated below
Alternatives Courses of nature
Franchise
opened
Franchise not
opened
Max
Open an online
service
$3000 $2000 $ 3000
Serve a new
menu
$1000 0 $ 1000
Sell the
restaurant
0 $2000 $ 2000
Prob 0.6 0.4
The decision selects the alternative with the minimum regret among all the
maximum regrets alternatives.

Decision Analysis for Restaurant Operation and Linear Programming for Digital Company_3

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