Allegiant Airlines is considering an overbooking policy for one of its flights. The airplane has 50 seats, but Allegiant is considering accepting more reservations than seats because sometimes passengers do not show up for their flights, resulting in empty seats. The PassengerAppearance worksheet in the file Overbooking contains data on 1,000 passengers showing whether or not they showed up for their respective flights.In addition, Allegiant has conducted a field experiment to gauge the demand for reservations for the current flight. During this experiment, they did not limit the number of reservations for the flight to observe the uncensored demand. The following table summarizes the result of the field experiment.No. of Reservations DemandedProbability480.05490.05500.15510.30520.25530.10540.10Suppose Allegiant receives a marginal profit of $108 for each passenger who books a reservation (regardless of whether they show up). In addition, suppose Allegiant incurs a rebooking cost of $303 for each passenger who books a reservation, but is denied seating due to a full airplane; this cost results from rescheduling the passenger and any loss of goodwill.To control its rebooking costs, Allegiant wants to set a limit on the number of reservations it will accept. Evaluate Allegiant's average net profit (in $) for reservation limits of 50, 52, and 54, respectively. (Use at least 15,000 trials. Round your answers to two decimal places.)average net profit for limit of 50? average net profit for limit of 52? average net profit for limit of 54?

To find the average net profit of provided limits we need to find the expected level of reservations…

Answered: Allegiant Airlines is considering an…

ENGR.ECONOMIC ANALYSIS

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Chapter1: Making Economics Decisions

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Allegiant Airlines is considering an overbooking policy for one of its flights. The airplane has 50 seats, but Allegiant is considering accepting more reservations than seats because sometimes passengers do not show up for their flights, resulting in empty seats. The PassengerAppearance worksheet in the file Overbooking contains data on 1,000 passengers showing whether or not they showed up for their respective flights.

In addition, Allegiant has conducted a field experiment to gauge the demand for reservations for the current flight. During this experiment, they did not limit the number of reservations for the flight to observe the uncensored demand. The following table summarizes the result of the field experiment.

No. of Reservations Demanded	Probability
48	0.05
49	0.05
50	0.15
51	0.30
52	0.25
53	0.10
54	0.10

Suppose Allegiant receives a marginal profit of $108 for each passenger who books a reservation (regardless of whether they show up). In addition, suppose Allegiant incurs a rebooking cost of $303 for each passenger who books a reservation, but is denied seating due to a full airplane; this cost results from rescheduling the passenger and any loss of goodwill.

To control its rebooking costs, Allegiant wants to set a limit on the number of reservations it will accept. Evaluate Allegiant's average net profit (in $) for reservation limits of 50, 52, and 54, respectively. (Use at least 15,000 trials. Round your answers to two decimal places.)

average net profit for limit of 50? average net profit for limit of 52? average net profit for limit of 54?

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