Xplain how many seats should super discount overbook flight

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Q. Next week, Super Discount Airlines has a flight from New York to Los Angeles which will be booked to capacity. The airline knows from past history which an average of 35 consumers (with a standard deviation of 24) cancels their reservation or do not show for the flight. Revenue from a ticket on the flight is $134. If the flight is overbooked, the airline has a policy of getting the consumer on the next available flight also giving the person a free round-trip ticket on a future flight. The cost of this free round-trip ticket averages $263. Super Discount considers the cost of flying the plane from New York to Los Angeles a sunk cost.

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By explain how many seats should Super Discount overbook the flight?

 

Reference no: EM1377807

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