MODEL:
!
This overbooking model determines the number of
reservations, M, to allow on a flight if the
no-show distribution is binomial;
! Some available data ;
N = 16; ! Total seats available;
V = 225; ! Revenue from a sold seat;
P = 100; ! Penalty for a turned down customer;
Q = .04; ! Probability a customer is a no-show;
! The probability to turn down customers is
@PBN( Q, M, M - N), therefore the corresponding
expected loss due to imperfect information is:
( V + P) * @PBN( Q, M, M - N), and we want the
loss to equal the revenue V on the margin. So,
the break-even equation is:;
( V + P) * @PBN( Q, M, M - N) = V;
! Note, you should round up if M is fractional;
END
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