An airline company has a flight with a capacity of 150 seats regularly scheduled from Boston to

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An airline company has a flight with a capacity of 150 seats regularly scheduled from Boston to San Francisco. On average, only 90% of the ticket holders show up for the flight, and the airline usually overbooks the flight by 10%. The ticket price is normally distributed with a mean of $350 and a standard deviation of $37. If every passenger shows up for the flight, the airline issues a voucher worth between $450 and $700 to each overbooked passenger. The value of the vouchers is uniformly distributed. Develop a Monte Carlo simulation and risk analysis model to examine and make a recommendation on the airline’s current overbooking practice.

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Business Analytics

ISBN: 9781265897109

2nd Edition

Authors: Sanjiv Jaggia, Alison Kelly, Kevin Lertwachara, Leida Chen

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