You decide to run your own business after quitting the job as a consultant. You are...

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You decide to run your own business after quitting the job as a consultant. You are running a small travel agency and your main business is to sell hotel rooms by renting some rooms from a popular hotel in Shanghai. You may rent up to 20 rooms at 200 Yuan each and currently sell them at 350 Yuan each on your website. You are now figuring out how many rooms you need to rent before the upcoming big holiday. Although this holiday is a good business opportunity, you are very cautious as your profit loss can be high if you cannot sell all the rooms before the holiday. Based on your observations so far, you expect the customer demand to be highly uncertain and to be any number in [6,7,...,30] with equal probability. (Q10-1) (4) What are the overstocking (overage) cost C, and the understocking (underage) cost C,? How many rooms do you need to rent from the hotel to maximize your expected profit from the holiday sales? (Q10-2) (4) You have realized from your long-term experience that there are two different classes of customers. If you sell the room at 250 Yuan, there will be very high demand in [25,26,...,45] with equal probability due to the low price and these customers tend to book very early. In case you sell it at 550, there will still be some demand in [1,2,...,10] with equal probability that will book a room only from 5 days before the holiday. Thus, you will first show a certain number (q₁) of rooms at 250 Yuan each until 6 days before the holiday. Then, you will increase and keep the price at 550 Yuan until the holiday so that you can sell the other (q₂) rooms expecting customers who are willing to pay that higher price. What are C, and C, for your decision on q₂? What are optimal q₁ and q₂? (Reminder: You can rent 20 rooms at most, which implies that q:+q₂<21.) (Q10-3) (4) After the big holiday, you signed a contract with the hotel to rent 20 rooms per day for a few months. You sell a room at 250 Yuan pursuing a fixed and stable income during the low season as demand will be larger than 20. In a dinner with your friend who also studied OM from SUFE, she suggests that you should sell more than 20 rooms on your website considering that a few customers may not actually appear to check in at the hotel. In this case, there is a possibility that you have more than 20 customers at a night and you must quickly book a room at a nearby higher-end hotel for each of the customers who cannot stay at your hotel, which will cost you 400 Yuan per customer. Upon hearing from you that the number of no-show customers will be any value in [1,2,3,4,5] with equal probability, she gives you the optimal decision. How many rooms in total should you sell on your website for each night? Please also specify related C, and C, for the calculation. You decide to run your own business after quitting the job as a consultant. You are running a small travel agency and your main business is to sell hotel rooms by renting some rooms from a popular hotel in Shanghai. You may rent up to 20 rooms at 200 Yuan each and currently sell them at 350 Yuan each on your website. You are now figuring out how many rooms you need to rent before the upcoming big holiday. Although this holiday is a good business opportunity, you are very cautious as your profit loss can be high if you cannot sell all the rooms before the holiday. Based on your observations so far, you expect the customer demand to be highly uncertain and to be any number in [6,7,...,30] with equal probability. (Q10-1) (4) What are the overstocking (overage) cost C, and the understocking (underage) cost C,? How many rooms do you need to rent from the hotel to maximize your expected profit from the holiday sales? (Q10-2) (4) You have realized from your long-term experience that there are two different classes of customers. If you sell the room at 250 Yuan, there will be very high demand in [25,26,...,45] with equal probability due to the low price and these customers tend to book very early. In case you sell it at 550, there will still be some demand in [1,2,...,10] with equal probability that will book a room only from 5 days before the holiday. Thus, you will first show a certain number (q₁) of rooms at 250 Yuan each until 6 days before the holiday. Then, you will increase and keep the price at 550 Yuan until the holiday so that you can sell the other (q₂) rooms expecting customers who are willing to pay that higher price. What are C, and C, for your decision on q₂? What are optimal q₁ and q₂? (Reminder: You can rent 20 rooms at most, which implies that q:+q₂<21.) (Q10-3) (4) After the big holiday, you signed a contract with the hotel to rent 20 rooms per day for a few months. You sell a room at 250 Yuan pursuing a fixed and stable income during the low season as demand will be larger than 20. In a dinner with your friend who also studied OM from SUFE, she suggests that you should sell more than 20 rooms on your website considering that a few customers may not actually appear to check in at the hotel. In this case, there is a possibility that you have more than 20 customers at a night and you must quickly book a room at a nearby higher-end hotel for each of the customers who cannot stay at your hotel, which will cost you 400 Yuan per customer. Upon hearing from you that the number of no-show customers will be any value in [1,2,3,4,5] with equal probability, she gives you the optimal decision. How many rooms in total should you sell on your website for each night? Please also specify related C, and C, for the calculation.

Answer rating: 100% (QA)

Q101 To determine the overstocking overage cost and the understocking underage cost we need to consider the profit from selling each room and the potential loss incurred when the demand exceeds or fal... View the full answer