Assume a variable cost of $10 per table and an average spending of $60 per table.With...

Assume a variable cost of $10 per table and an average spending of $60 per table.With the daily deal ($60 for $30 coupon), Groupon provides Mr. Chang with a revenue of $17 pertable. The analysis provided in the New York Timesblog indicated that Mr. Chang makes money($7 per table) through the daily deal (rather than incurring advertising expense).

Question 3:After some negotiations Mr. Chang receives the following alternative offers:1. A Groupon deal with a revenue of $22 per table.2. A Savored deal in which the total revenue when reserving xtables isr(x) = 400 + 17·(x−10).This deal has the condition that at least 10 tables need to be reserved for Savored customers.3. A Savored deal in which the total revenue per table is $18 is the number of reserved tables issmaller than 30 and $25 if the number of reserved tables is at least 30.

Expert Solution

We select the 3 alternatives and plot the payout of each alternative against the number of tables reserved

No. Of Tables	Alternative 1	Alternative 2	Alternative 3
A	B = 22*A	C = min (0, 400 + 17* (x-10))	D = 18A if A<30, 25A if A>=30
1	22	0	18
2	44	0	36
3	66	0	54
4	88	0	72
5	110	0	90
6	132	0	108
7	154	0	126
8	176	0	144
9	198	0	162
10	220	400	180
11	242	417	198
12	264	434	216
13	286	451	234
14	308	468	252
15	330	485	270
16	352	502	288
17	374	519	306
18	396	536	324
19	418	553	342
20	440	570	360
21	462	587	378
22	484	604	396
23	506	621	414
24	528	638	432
25	550	655	450
26	572	672	468
27	594	689	486
28	616	706	504
29	638	723	522
30	660	740	750
31	682	757	775
32	704	774	800
33	726	791	825
34	748	808	850
35	770	825	875
36	792	842	900

If we plot this on a graph, we get the following

So we see that will 9 tables are reserved, it is best to go with Alternative 1.

If The number of Reserved tables are between 10 and 30, then it is best to go with alternative 2

If the number of Reserved Tables are 30 or more than that, then it is best to go with Alternative 3.

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Rahul Sunny answered 2 years ago

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