The American Bar Association (ABA) is holding its annual convention in Las Vegas. Six months before the
Question:
The American Bar Association (ABA) is holding its annual convention in Las Vegas. Six months before the convention begins, the ABA must decide how many rooms should be reserved in the convention hotel. At this time, the ABA can reserve rooms at a cost of $50 per room, but six months before the convention, the ABA does not know with certainty how many people will attend the convention. The ABA believes, however, that the number of rooms required is normally distributed, with a mean of 5,000 rooms and a standard deviation of 2,000 rooms. If the number of rooms required exceeds the number of rooms reserved at the convention hotel, extra rooms will have to be found at neighboring hotels at a cost of $80 per room. It is inconvenient for convention participants to stay at neighboring hotels. We measure this inconvenience by assessing an additional cost of $10 for each room obtained at a neighboring hotel. If the goal is to minimize the expected cost to the ABA and its members, how many rooms should the ABA reserve at the convention hotel?
Step by Step Answer:
Operations Research Applications And Algorithms
ISBN: 9780534380588
4th Edition
Authors: Wayne L. Winston