1. (10 pts) You are managing the Killington Inn, a ski lodge dedicated to the needs of skiers in the central Vermont ski region (the mountains of Killington, Okemo, etc.). Each year the Inn advertises and sells weekend ski packages that include two nights lodging (Friday, Saturday) plus unlimited skiing for two skiers at all nearby mountains. The discount package sells for $459, the full price (Class 1) is $599. Suppose demand for full fare follows a Poisson distribution with mean A = 18. (a) Calculate the optimal protection level for class 1 using Littlewood's two-class model. (b) Suppose a customer denied a class 2 price of $459 at the Killington Inn upgrades to class 1 10% of the time. Assume a Poisson distribution for class 1 demand with = 18 (as in #1), and assume as before that demand for class 2 materializes before class 1. Use Littlewood's 2-class model with upgrades to calculate the optimal protection level for class 1. (Because the distribution is discrete, you will need to build a table in Excel.) (c) Repeat your analysis with an upgrade probability of 20%.