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You decide to run your own business after quitting the job as a consultant. You are running a small travel agency and your main

You decide to run your own business after quitting the job as a consultant. You are running a small travel agency and your main business is to sell hotel rooms by renting some rooms from a popular hotel in Shanghai. You may rent up to 20 rooms at 200 Yuan each and currently sell them at 350 Yuan each on your website. You are now figuring out how many rooms you need to rent before the upcoming big holiday. Although this holiday is a good business opportunity, you are very cautious as your profit loss can be high if you cannot sell all the rooms before the holiday. Based on your observations so far, you expect the customer demand to be highly uncertain and to be any number in [6,7,...,30] with equal probability. (Q10-1) (4) What are the overstocking (overage) cost C, and the understocking (underage) cost C,? How many rooms do you need to rent from the hotel to maximize your expected profit from the holiday sales? (Q10-2) (4) You have realized from your long-term experience that there are two different classes of customers. If you sell the room at 250 Yuan, there will be very high demand in [25,26,...,45] with equal probability due to the low price and these customers tend to book very early. In case you sell it at 550, there will still be some demand in [1,2,...,10] with equal probability that will book a room only from 5 days before the holiday. Thus, you will first show a certain number (q) of rooms at 250 Yuan each until 6 days before the holiday. Then, you will increase and keep the price at 550 Yuan until the holiday so that you can sell the other (q) rooms expecting customers who are willing to pay that higher price. What are C, and C, for your decision on q? What are optimal q and q? (Reminder: You can rent 20 rooms at most, which implies that q:+q

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Q101 To determine the overstocking overage cost and the understocking underage cost we need to consider the profit from selling each room and the potential loss incurred when the demand exceeds or fal... blur-text-image

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