Question: This is the second time I'm posting this question. I know that it has been answered numerous times on here, but it is the same
This is the second time I'm posting this question. I know that it has been answered numerous times on here, but it is the same copy and pasted answer each time and someone just copy and pasted the same answer when I posted. I'm looking for someone to actually work the problem here so I can get a different perspective and learn from it. If you are just going to copy and paste the same answer, please don't respond to this question. Thank you!
Le Meridien in San Francisco has 160 rooms. The hotel has an ample low fare demand at the room rate of $200 per night, but the demand from the high fare class, which pays $450 per night on average, is uncertain. The high fare demand is normally distributed with mean 60 and standard deviation 42.
When high-fare demand is less than their protection level, rooms went empty because it was too late to sell the rooms to low-fare arrivals. But now Le Meridien has an opportunity to sell rooms at the last-minute to a third party seller (such as hotwire.com and price-line). The third party seller buys the unsold rooms on that day at $80, and assumes all the risk of selling those rooms on its website. How many rooms should Le Meridien now protect for high fare customers given that the hotel now has this opportunity to salvage unsold inventory at the last minute for $80? Assume high fare customers still pay $450 per night, and the demand for high fare customers is still normally distributed with mean 60 and standard deviation 42. (Early demand at the low fare of $200 remains ample and Le Meridien still makes this decision to maximize expected revenue.)
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