What is his expected marginal profit that jim makes

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Reference no: EM132293917

Jim Johnson operates a luxury tour service to take tourists to "The Northern Lights Week" on Friday night and bring them back to town on Sunday night. The tour has 25-person capacity but sometimes there are fewer persons due to no show. His records show that about 5% of booking holders do not show up for their trip. Tour costs $150 per person and are non-refundable. If Jim overbooks the tour and more than 25 persons show up, some of them will alternate tour arrangements. This alternative costs the company $350/person because Jim has to make arrangements paying premium costs for extra capacity for such extra people. Jim plans to accept 35 bookings (overbook 10 passengers) as his reservation policy.

Run a simulation using Analytic Solver to understand Jim’s reservation policy. Run 1000 trials with a seed value of 12345, and answer the following questions from your simulation results:

A) What is his expected marginal profit that Jim makes?

B) What is the probability that he can make more than $3000? Simulation model showing the workings and values at the end of 1000 trials). Assume the demand for the tour is a triangular distribution with parameters (25, 35, 40).

Reference no: EM132293917

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