Question: Posting it for the second time! Any expert out there who can give me the correct answer Please give me the correct option with calculation
Posting it for the second time! Any expert out there who can give me the correct answer
Please give me the correct option with calculation ( one expert answered the question, 50 is not the correct option)
I will give thumbs up and good comments
An airline is taking reservations for a direct flight from New York to Chicago. The aircraft used for this flight has 150 seats in total. The company is practicing a flat pricing policy for this route with the price of $300/ticket. Suppose the operating cost is zero dollars per seat.
The airline customers have been known to cancel their bookings near a flight date. To address this problem of cancellation, the airline implements an overbooking method. A passenger is bumped if he/she already booked and paid for a ticket but can't get a seat on the airplane because the actual number of passengers showing up is larger than the seating capacity of the airplane. In this case, the airline has to use a backup plan that costs the company $500 per a bumped passenger.
Suppose the airline implements a booking policy under which a customer does not pay/deposit any amount of money when booking (so there is no penalty for cancellation). From the past data, the airline estimates that the number of cancellations follows a normal distribution with a mean of 40 seats and a standard deviation of 30 seats. Find the optimal number of overbookings that maximizes the expected revenue from this flight for the company.
a) 48
b) 56
c) 52
d) 60
e) 58
f) 54
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