Question
Amy Pond works as a singing telegram in her hometown. She is hired by the townspeople to sing birthday songs and get-well wishes and to
Amy Pond works as a singing telegram in her hometown. She is hired by the townspeople to sing birthday songs and get-well wishes and to commemorate other happy occasions by just showing up at the celebrant's door with her boombox and performing. While she takes her job seriously, many of her clients see her performance as a prank. Because of this reason, some of her customers hire her but then cancel at the last minute because they are too embarrassed to go forward with their original plan. Amy found that she frequently turned down new customers because the time was reserved for a customer who then cancelled at the last minute. She has decided that she needs to institute an overbooking policy to increase her weekly earnings. She charges $50 per telegram, but she cannot collect the money for cancelled gigs. If she overbooks by a lot and cannot make it to all of her scheduled gigs, customers with reservations who did not receive a telegram can be very unhappy. Only 20% of those customers are understanding in the situation and will not blame Amy. The remaining customers are so upset by this situation that they refuse to call her again and gossip about her at the local pub. Amy estimates that she will have an opportunity loss of $150 for each upset customer. Amy has looked at her last 100 weeks working as a singing telegram, where she had booked 30 gigs per week, and summarized her experience with cancellations in the following table:
# of Customers who Cancel Telegrams | % of weeks |
0 | 5 |
1 | 10 |
2 | 20 |
3 | 15 |
4 | 15 |
5 | 10 |
6 | 5 |
7 | 5 |
8 | 5 |
9 | 5 |
10 | 5 |
Using simulation analysis, determine an overbooking policy for Amy.?
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