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Because of booking cancellations, managers at Busconalas Airlines need to decide how much to overbook their flights (how many tickets above the plane capacity should
Because of booking cancellations, managers at Busconalas Airlines need to decide how much to overbook their flights (how many tickets above the plane capacity should be sold). For example, if 10 tickets are overbooked and there are 15 cancellations, 5 seats will be empty without generating revenue. If however, 15 tickets are overbooked and there are 10 cancellations, 5 reservations will need to be compensated and accommodated in a different flight. The price per ticket is $500. If a reservation shows up and there are not seats available, the compensation and accommodation provided have a net cost of $200 per reservation. Historical data suggests that the number of cancellations every week can be represented by a Normal distribution with a mean of 12 cancellations and a standard deviation of 2 cancellations. Determine how many tickets should be overbooked and provide a brief justification
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