Answered: Offwego Airlines has a daily flight…

Practical Management Science

6th Edition

ISBN:9781337406659

Author:WINSTON, Wayne L.

Publisher:WINSTON, Wayne L.

Chapter11: Simulation Models

Section: Chapter Questions

Problem 47P

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Question

Offwego Airlines has a daily flight from Chicago to Las Vegas. On average, 18 ticket holders
cancel their reservations, so the company intentionally overbooks the flight. Cancellations can be
described by a normal distribution with a mean of 18 passengers and a standard deviation of
4.55 passengers. Profit per passenger is $99. If a passenger arrives but cannot board due to
overbooking, the company policy is to provide a cash payment of $200. How many tickets
should be overbooked to maximize expected profit?

Features Features Normal distribution is characterized by two parameters, mean (µ) and standard deviation (σ). When graphed, the mean represents the center of the bell curve and the graph is perfectly symmetric about the center. The mean, median, and mode are all equal for a normal distribution. The standard deviation measures the data's spread from the center. The higher the standard deviation, the more the data is spread out and the flatter the bell curve looks. Variance is another commonly used measure of the spread of the distribution and is equal to the square of the standard deviation.

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