WK9_Tony_Leasing an Apartment

Problem Statement

When I first came into the town I am currently living in, I had to look for an apartment to lease. I saw several properties, many of which did not meet my requirement. I wanted a standalone well finished building in a decent environment. I had to narrow the choice to 3 three properties of such. How I made the choice on the best property to lease will now be discussed in line with Engineering Economy principles.

Alternative Solutions

The alternative solutions represent the three offers I narrowed my search to.

1. Alternative A – A 4 bedroom bungalow in a compound of its own

2. Alternative B – A 4 bedroom duplex in a compound of its own

3. Alternative C – A 4 Bedroom bungalow in an estate

Alternative A

The exterior of this bungalow was not painted. The owner has recently been posted by his Company to another town so he had to move from the house. The finishing generally is fairly okay, the environment is decent and accessibility is fair. Distance from my place of work is about 8km. The rental cost is $2,960/annum. No service charge applicable.

Alternative B

This is a duplex that is very well finished and in a compound of its own. The owner had recently relocated abroad. The environment is decent and accessibility is fair. Distance from work is about 8km. The rental cost is $4,605/annum. No service charge applicable.

Alternative C

This is a well finished detached bungalow in an estate of 16 prototype houses. The owner is on cross posting outside the country. The environment is very decent and accessibility good. Distance from work is about 5km. The rental cost is $3782 plus a service charge of $1,184.

Selection Criteria

1. Distance to work

2. Accessibility

3. Decent Environment

4. Cost

5. Finishing

Analysis and Comparison of Alternatives

Summarized below is the basic data for the alternatives.

Table 1: Alternatives Attributes

Attributes	Alternative A- Standalone bungalow	Alternative B Detached Duplex	Alternative C - Detached bungalow in an estate
Distance	8km	8km	5km
Accessibility	fair	fair	good
Decent Environ	fair	fair	Excellent
Cost	$2,960	$4,605	$4,966
Finishing	fair	Excellent	good

The comparative analysis will be done using non-compensatory models of Satisficing and Lexicography. Satisficing, sometimes referred to as the method of feasible ranges, requires the establishment of minimum or maximum acceptable values (the standard) for each attribute [1]. Alternatives with one or more attributes outside the standard are discontinued from further consideration [2]. To use satisficing, we must first establish the table of feasible ranges as in table 2 below.

Table 2: Feasible Ranges for Satisficing

Attribute	Minimum acceptable value	Maximum acceptable value	Unacceptable Alternative
Distance		10km	None
Accessibility	fair	Excellent	None
Decent Environ	fair	Excellent	None
Cost		$5,000	None
Finishing	good	Excellent	Alternative A

Following from table 1 we are left with Alternative B & C. To choose between this two we would use the lexicography model which is suitable when one attribute is more important than all other attributes. In order to do this we need to rank each of the 5 attributes in order of importance using ordinal ranking technique as shown below.

Table 3: Ordinal Ranking of Attributes

A	Result of paired Comparisons
	Accessibility > Distance	Accessibility is more important than distance
	Decent Environ > Distance	Decent environ is more important than distance
	Decent Environ > Cost	Decent environ is more important than cost
	Decent Environ > Finishing	Decent environ is more important than finishing
	Decent Environ > Accessibility	Decent environ is more important than accessibility
	Cost > Distance	Cost is more important than distance
	Cost > Accessibility	Cost is more important than accessibility
	Finishing > Distance	Finishing is more important than distance
	Finishing > Accessibility	Finishing is more important than accessibility
	Finishing > Cost	Finishing is more important than cost
B	Attribute	Number of times on left of > (=Ordinal ranking)
	Accessibility	1
	Decent Environ	4
	Cost	2
	Finishing	3
	Distance	0

Application of lexicography to the ordinal ranking gives the following result.

Table 4: Application of lexicography

Attribute	Rank*	Alternative Rank**
Distance	0	Alternative C > B
Accessibility	1	Alternative C > B
Decent Environ	4	Alternative C > B
Cost	2	Alternative B > C
Finishing	3	Alternative B > C

*Rank of 4 = most important, 0 = least important.

Selection of Best Alternative

Selection of best alternative is based on the comparative analysis of the alternatives as shown above using non-compensatory models of Satisficing and lexicography. When using lexicography, the alternative with the highest ranked attribute is the best choice and in this case it is ALTERNATIVE C with a rank of 4 for decent environment. This choice shows that a decent environment was more important for me than any other attribute.

Performance Monitoring & Post Evaluation of Results

1. I enjoyed the environment throughout my stay there

2. Cost was not a strong issue when I made the choice but it became a strong issue later as a result of rising cost of services. I started with a service charge of $1,184pa and within two years it rose to $3,157.

References

1. Sullivan, W., Wicks, E., Koelling, C., Engineering Economy, 14.6.2 – Satisficing

2. Ibid