Spirit Airlines offers one way, nonstop flights from Atlantic City, New Jersey, to Myrtle Beach, South Carolina, for $ 90. Spirit airlines will overbook these flights by selling more tickets than available seats because many flights experience no shows (passengers who book flights but fail to arrive at the terminal). There are three cases to consider when constructing the decision table for this problem. 1. If the number of overbooked passengers exceeds the number of no shows, there are more people at the terminal than there are available seats on the plane. In this instance, Spirit Airlines refunds the $ 90 fare to those bumped from the flight and compensates them an additional $ 150 for their inconvenience. 2. If the number of overbooked passengers is less than the number of no shows, the flight takes off with empty seats. The cost to Spirit Airlines is the lost opportunity to sell additional $ 90 fares had the firm booked enough passengers. 3. If the number of overbooked passengers equals the number of no shows, there is no cost to Spirit Airlines.
Spirit Airlines has figured out that the probabilities of experiencing 0, 1, 2, and 3 no shows for the flight between Atlantic City and Myrtle Beach are 0.16, 0.32, 0.25, and 0.27 respectively.
a. Choose the best number of passengers to overbook between these two destinations.
b. What is the most that Spirit Airlines should pay per flight for additional information about the probability of no shows?

  • CreatedJuly 29, 2015
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