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A charter fishing boat operating out of Port Aransas on the Gulf coast has recorded the no-show experience show below over the past 20 excursions. To avoid the opportunity of losing the $50 fee charged per fisherman, the boat captain is considering a policy of accepting more reservations than his boat has capacity. When this policy results in turning away disappointed fishermen, he plans to hire his brother to accommodate the overbooked fishermen at $120 apiece.
No-show 0 1 2 3 4
Frequency 4 5 6 3 2
a. Using the "critical fractile" probability, P(d<x), how many reservations would you recommend overbooking?
b. What is the expected loss per excursion, if only two reservations are overbooked?
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