(a) Compute shadow prices for each of the 16 demand and 4 capacity constraints.

(b) Boston-Chicago Q-class demand has std. deviation = 5.3. Compare allowable decrease and increase for this constraint with 1.28 (10% critical value for the normal distribution). Does the allowable increase for the demand constraints exceed the 1.28? How about the allowable decrease? If the threshold of 1.28 is not exceeded, there is at least 10% chance that the shadow price for the constraint may be inappropriate.

(c) Suppose that you are considering introducing a business class ticket for the BostonChicago itinerary. Two business class seats use the same space as three Q or Y class seats. What is the minimal price you should charge for a business class seat in order to increase profits?

(d) In the absence of business class, you are considering to reduce the price for Q-class ticket on the Boston-Chicago flight. How much can you reduce it without having to re-optimize the ticket sales?

Answer rating: 100% (QA)

a To compute the shadow prices for each of the demand and capacity constraints we would need access ... View the full answer