The Blue Roof Inn overbooks two rooms a night. Room rates run $100 a night but cost only $30 to maintain Bumped customers are sent to a nearby hotel for $80 a night. What is the cost of overbooking? What is the cost of underbooking? Given the following distribution of no-shows, should Blue Roof continue its current policy?
No-Shows Probability
0 .............0.30
1 .............0.20
2 .............0.10
3 .............0.30
4 .............0.10