Question:

Airlines constantly monitor the "booking curve" for each flight of their network. Simply put, a booking curve is the time-phased trajectory of the bookings. From one day to the next, bookings follow the following simple relationship:

??+1 = (?? + ??+1) ? (1 ? ?)

where,

??= Total bookings at the end of day i

?? = Incremental bookings that come in on day i

? = Cancellation Rate

For a certain flight an airline operates a plane with 200 seats. Currently it has a total of 160 bookings (?0). It estimates the daily (incremental) bookings to follow a normal distribution with mean = 8 and std deviation = 2. It also estimates its daily cancellation rate to be 4%

(i) What will the total bookings be at the end of ten days?

(ii) The airline has a stated goal of keeping the probability of denied boarding to be no more than 1%. Will this flight satisfy that corporate objective? [Assume there are no transactions (bookings or cancellations) after the end of ten days.]

[Run 1000 iterations. Save results so that grader can check values from your runs]

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