Business, 21.04.2021 04:00 Ilikepandas2019
Next week, Super Discount Airlines has a flight from New York to Los Angeles that will be booked to capacity. The airline knows from past history that an average of 35 customers (with a standard deviation of 24) cancel 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 customer on the next available flight and 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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