Question

A commuter airline overbooks all of its flights by one passenger (i.e., the ticket agent will take seven reservations for an airplane that has only six seats). The no- show experience for the past 20 days is shown below: No-shows 0 1 2 3 4 Frequency 6 5 4 3 2 If the net revenue from a passenger is $40 and the overbooking charges per passenger is $60, is their overbooking policy optimal? Hint: Note that frequency of No-shows is given. First convert this to a probability table by dividing each of the numbers by 20. Next, calculate cumulative probability for each no-show possibility by successively adding the probabilities up to that row. ) Then use the critical ratio approach. Do not use the formula (F-D)/F here. There are no “discount” prices. The critical fractile in this case will be (net revenue per ticket)/(net revenue per ticket + Overbooking charges). You can also use Excel and be precise on the optimal decision.

Name: a commuter airline overbooks all of its flights by one passenger ie the ticket agent will take seven reservations for an airplane that has only six seats the no show experience for the past 20 days is
Uploaded: 2023-01-26T04:22:10-08:00
Duration: 3 min 40 s
Channel: Sri K
Description: a commuter airline overbooks all of its flights by one passenger ie the ticket agent will take seven reservations for an airplane that has only six seats the no show experience for the past 20 days is

          A commuter airline overbooks all of its flights by one passenger
(i.e., the ticket agent will take seven reservations for an
airplane that has only six seats). The no- show experience for the
past 20 days is shown below: No-shows 0 1 2 3 4 Frequency 6 5 4 3 2
If the net revenue from a passenger is $40 and the overbooking
charges per passenger is $60, is their overbooking policy optimal?
Hint: Note that frequency of No-shows is given. First convert this
to a probability table by dividing each of the numbers by 20. Next,
calculate cumulative probability for each no-show possibility by
successively adding the probabilities up to that row. ) Then use
the critical ratio approach. Do not use the formula (F-D)/F here.
There are no “discount” prices. The critical fractile in this case
will be (net revenue per ticket)/(net revenue per ticket +
Overbooking charges). You can also use Excel and be precise on the
optimal decision.

Added by Matthew P.

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