Question: Next week Super Discount Airlines has a flight from New
Next week, Super Discount Airlines has a flight from New York to Los Angeles that will be booked to capacity. The airline knows from past history that an average of 25 customers ( with a standard deviation of 15) cancel their reservation or do not show for the flight. Revenue from a ticket on the flight is $ 125. If the flight is overbooked, the airline has a policy of getting the customer on the next available flight and giving the person a free round- trip ticket on a future flight. The cost of this free round- trip ticket averages $ 250. Super Discount considers the cost of flying the plane from New York to Los Angeles a sunk cost. By how many seats should Super Discount overbook the flight?
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