A low-cost airline sells only nonrefundable tickets. Customers pay in full at the time of booking. If they cancel or miss their flight for any reason, no portion of the price is refunded, and they cannot board another flight without buying a new ticket.

Despite this policy, the airline still experiences a no-show rate of 5%. That is, if it sells 100 tickets on a 100-seat aircraft, it will, on average, depart with 5 empty seats.

Should this airline overbook? If so, what kind of policy should it adopt? If it should not overbook, why?