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Section 1: Binomial Distribution
Suppose you own a romantic restaurant called "Eat Prey, Love" that specializes in serving fresh game. Your restaurant is very popular, and reservations are required. You have 40 tables available and are trying to decide how many reservations to accept. You know from your historical data that, on average, 82% of parties that make reservations show up (18% noshows).
1. You are considering taking anywhere between 40 and 60 reservations. On average, you make $25 in profit for each table (after all costs are considered). If a party shows up and there is no table for them (you are overbooked), you will give them a $50 gift certificate for the inconvenience (you lose $50). - Make a table that shows the expected number of guests (X) and the expected profit for each possible number of reservations (40, 41, ...,60). Expected profit needs to take into consideration overbooking (hint: you could use an IF function in Excel). - Comment briefly on your findings and discuss what number of reservations you think is ideal.
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