How many tickets should be overbooked to maximize profit

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Q. Off we go Airlines has a daily flight from Chicago to Las Vegas. On average, 18 ticket holders cancel their reservations, so business intentionally overbooks flight. Cancellations can be expressed 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, business policy is to give cash payment of $200. Explain how many tickets should be overbooked to maximize expected profit?

Reference no: EM1374812

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