# Question

An aircraft has 100 seats, and there are two types of fares: full ($499) and discount ($99).

a) While there is unlimited demand for discount fares, demand for full fares is estimated to be Poisson with mean l=20 (the table below gives the distribution function). How many seats should be protected for full-fare passengers?

b) An airline has found that the number of people who purchased tickets and did not show up for a flight is normally distributed with mean of 20 and standard deviation of 10. The airline estimates that the ill will and penalty costs associated with not being able to board a passenger holding confirmed reservation are estimated to be $600. Assume that opportunity cost of flying an empty seat is $99 (price that discount passenger would pay). How much should airline overbook theflight?

a) While there is unlimited demand for discount fares, demand for full fares is estimated to be Poisson with mean l=20 (the table below gives the distribution function). How many seats should be protected for full-fare passengers?

b) An airline has found that the number of people who purchased tickets and did not show up for a flight is normally distributed with mean of 20 and standard deviation of 10. The airline estimates that the ill will and penalty costs associated with not being able to board a passenger holding confirmed reservation are estimated to be $600. Assume that opportunity cost of flying an empty seat is $99 (price that discount passenger would pay). How much should airline overbook theflight?

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