Explain how many seats should super discount overbook flight

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Reference no: EM1377293

Q. Next week, Super Discount Airlines has a flight from New York to Los Angeles which will be booked to capacity. The airline knows from past history which an average of 25 consumers (with a standard deviation of 15) cancels their reservation or do not show for the flight. Revenue from a ticket on the flight is $125. If the flight is overbooked, the airlines have a policy of getting the consumers on the next available flight also giving the person a free round-trip ticket on a future flight. The cost of this round trip ticket averages $250. Super Discount considers the cost of flying the plane from New York to L.A. a sunk cost. By explain how many seats should Super Discount overbook the flight?

Reference no: EM1377293

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