You are considering 4 restaurants. They differ from each other in price and cust

Question

You are considering 4 restaurants. They differ from each other in price and customer reviews.

Customer reviews are rated (1 = worst to 5 = best)

Restaurant 1: Price is $100, Rating is 2
Restaurant 2: Price is $250, Rating is 5
Restaurant 3: Price is $200, Rating is 4
Restaurant 4: Price is $150, Rating is 2

Which of the following statement is true?

Restaurant 1 is pareto dominated by Restaurant 2

Restaurant 1 is pareto dominated by Restaurant 3

Restaurant 2 is pareto dominated by Restaurant 4

Restaurant 2 is pareto dominated by Restaurant 3

Restaurant 3 is pareto dominated by Restaurant 2

Restaurant 3 is pareto dominated by Restaurant 4

Restaurant 3 is pareto dominated by Resturant 1

Restaurant 4 is pareto dominated by Restaurant 1

Restaurant 4 is pareto dominated by Restaurant 2

None of the above are true.

Restaurant 1 is pareto dominated by Restaurant 2

Restaurant 1 is pareto dominated by Restaurant 3

Restaurant 2 is pareto dominated by Restaurant 4

Restaurant 2 is pareto dominated by Restaurant 3

Restaurant 3 is pareto dominated by Restaurant 2

Restaurant 3 is pareto dominated by Restaurant 4

Restaurant 3 is pareto dominated by Resturant 1

Restaurant 4 is pareto dominated by Restaurant 1

Restaurant 4 is pareto dominated by Restaurant 2

None of the above are true.

Explanation / Answer

Restaurant 2 is Pareto dominated by Restaurant 3

Under the Pareto dominance theory, one participant is better off than the other in the manner that it does not leave the other participant worse off. In case of Restaurant 2, the price is highest of the lost i.e. $250 while in case of Restaurant 3,the price is second highest i.e. $200 and in terms of rating, Restaurant 2 is rated the highest in the lot with 5 rating while that of 3 is rated 4.Hence Restaurant 2 dominates Restaurant 3 and is better-off.

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