Question: Q 1 0 : When high - fare demand is less than their protection level, The Warwick assumes rooms go empty because it is too

Q10: When high-fare demand is less than their protection level, The Warwick assumes rooms go empty because it is too late to sell the rooms to low-fare arrivals. But now they have an opportunity to sell those rooms at the last-minute to a third-party seller of opaque goods, such as Hotwire.com or Priceline.com. The third-party seller buys the room inventory on the day at $50 and assumes all the risk of selling those rooms on its website. What critical ratio should the hotel use for setting the protection level for its high fare customer class (who continue to pay $330 per night, and whose demand is still normally distributed with mean 50 and standard deviation 30) knowing that it now has this opportunity to sell off remaining inventory at the last minute for $50? Early demand at the low fare of $150 remains ample, and the Warwick still makes this decision to maximize expected revenue.

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