Sunny Airlines is contemplating overbooking the economy clas…
Sunny Airlines is contemplating overbooking the economy class in its popular daily flight from Minneapolis to Honolulu, with the objective of extracting the maximum out of otherwise happy vacationers. The number of no-shows in the economy class of this flight over the past few weeks is normally distributed with the mean of 2 and standard deviation 3. All customers pay for the ticket ($500) in advance and no shows are not given a refund. Each customer who is denied boarding is refunded the price of the ticket and is compensated $350 for the trouble. There are 250 seats in the economy class on this route. What are the costs of over-estimation?