Question: The management of Quality Airlines has decided to base its

The management of Quality Airlines has decided to base its overbooking policy on the overbooking model presented in Sec. 18.8. This policy now needs to be applied to a new flight from Seattle to Atlanta. The airplane has 125 seats available for a nonrefundable fare of $250. However, since there commonly are a few no-shows on similar flights, the airline should accept a few more than 125 reservations. On those occasions when more than 125 arrive to take the flight, the airline will find volunteers who are willing to be put free on a later Quality Airlines flight that has available seats, in return for being given a certificate worth $500 (but that would cost the company just $300) toward any future travel on this airline. Management feels that an additional $300 should be assessed for the intangible cost of a loss of goodwill for inconveniencing these customers.
Based on previous experience with similar flights having about 125 reservations, it is estimated that the relative frequency of the number of no-shows (independent of the exact number of reservations) will be as shown below.
Number of No-Shows Relative Frequency
0.............. 0%
1............... 5
2.............. 10
3.............. 10
4.............. 15
5.............. 20
6.............. 15
7.............. 10
8.............. 10
9.............. 5
Instead of using the binomial distribution, use this distribution directly with the overbooking model to determine how much overbooking the company should do for this flight.



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  • CreatedSeptember 22, 2015
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