Bankruptcy effect on U.S. airfares. Both Delta Airlines and USAir filed for bankruptcy. A study of the impact of bankruptcy on the fares charged by U.S. airlines was published in Research in Applied Economics (Vol. 2: 2010). The researchers collected data on Orlando-bound airfares for three airlines—Southwest (a stable airline). Delta (just entering bankruptcy at the time), and USAir (emerging from bankruptcy). A large sample of nonrefundable ticket prices was obtained for each airline following USAir’s emergence from bankruptcy, and then a 95% confidence interval for the true
Airline | 95% Confidence Interval |
Southwest | (S412, $496) |
Delta | (S468, $500) |
USAir | (S247, $372) |
- a. What confidence coefficient was used to generate the confidence intervals?
- b. Give a practical interpretation of each of the 95% confidence intervals. Use the phrase "95% confident' in your answer.
- c. When you say you are “95% confident.” what do you mean?
- d. If you want to reduce the width of each confidence interval, should you use a smaller or larger confidence coefficient? Explain.
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