Question: Problem 4. (15 pts) Next week, Super Discount Airlines has a flight from New York to Los Angeles that will be booked to capacity. Revenue

Problem 4. (15 pts) Next week, Super Discount

Problem 4. (15 pts) Next week, Super Discount Airlines has a flight from New York to Los Angeles that will be booked to capacity. Revenue from a ticket on the flight is $125. If the flight is overbooked, the airline has a policy of getting the customer on the next available flight and giving the person some coupons, which in total incurs a cost of $250. Assume that in this case the customer does not need to pay for the original ticket. Past history show that the number of no-shows has the following distribution 0.2 No-shows: Probability 1 2 0.3 3 0.25 4 0.1 5 0.15 a. What are the unit underage cost and overage cost? b. By how many seats should Super Discount overbook the flight

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