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Airlines regularly overbook their flights. PQ Airways has confirmed 400 passengers on its flight 999 to London but its A-380 is configured to carry only 396 passengers. The probability of a passenger with a confirmed seat not showing up is 0.01. (Assume passengers behave independently.) PQ Airways 1 is contractually obliged to indemnify each passenger with a confirmed seat who is left behind with $1350.
a. What is the probability that everyone with a confirmed seat who shows up will fly?
b. What is the PQ Airways expected passenger indemnification cost?
c. You are the first in line on the waiting list? What is your chance of flying in the PQ 999?
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