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Las Vegas has long been known for its extravagant, glitzy hotels and casinos. In the early part of this decade, Las Vegas was booming, gambling revenues were high, as were occupancy rates at hotels across the city. Developers rushed in to meet the demand for more rooms. Now, many of those projects have been scaled back or failed completely. One such project, the Fontainebleau, stands uncompleted and in bankruptcy. Penn National may be interested in an acquisition, but costs to complete the project may be higher than the estimated value of the luxury hotel.

QUESTIONS:

  1. How would you describe the decision conditions that existed when the project began four years ago and now? Is there any difference and, if so, why?
  2. A decision to continue with the Fontainebleau project might be consistent with what type(s) of decision error or trap?
  3. How should Penn National go about evaluating the decision whether or not to purchase the Fontainebleau?

SOURCE: A. Berzon, “Doubts Are Cast on Value of Las Vegas’ Fontainebleau,” Wall Street Journal (Retrievable online at http://online.wsj.com/article/SB10001424052748704882404574465874047672190.html)

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