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What does it mean for relationship between the two prices

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Question - The Littlewood's Rule indicates that the optimal protection level is determined by only three information: the low/high fare ratio, the high price demand mean, and the high price demand volatility (e.g., standard deviation). The table below is from the PPT file's "Littlewood Excel Example," where we calcuate the optimal protection levels y* using the Excel function =norminv(1-pd/pf, high price demand mean , high price demand standard deviation). Please answer the following questions based on the patterns you observed from the table.

When the fare ratio decreaes from 0.6 to 0.4, what does it mean for the relationship between the two prices?

Reference no: EM133042686

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