$1$

$1$

$.$

$5$

$.$

$$An airline serving Denver's International Airport and Steamboat Springs, Colorado, is

considering overbooking its flights to avoid flying with empty seats. For example, the ticket agent is

thinking of taking seven reservations for an airplane that has only six seats. During the past month, the

no

$-$

show experience has been:

The operating costs associated with each flight are pilot, $

$1$

$5$

$0$

; first officer, $

$1$

$0$

$0$

; fuel, $

$3$

$0$

; and landing

fee, $

$2$

$0$

$.$

$$What would be your recommendation for overbooking if a one

$-$

way ticket sells for $

$8$

$0$

$$and

the cost of not honoring a reservation is a free lift ticket worth $

$5$

$0$

$$plus a seat on the next flight? What

is the expected profit per flight for your overbooking choice?

student submitted image, transcription available