Answer Happy

An airline offers two fare classes for coach seats on a particular flight: full-
fare class at $430/ticket and economy class at $216/ticket. There are 230
coach seats on the aircraft. Demand for full-fare seats is listed in the
following table.
Economy-class customers must buy their tickets three weeks in advance,
and these tickets are expected to sell out.
An airline offers two fare classes for coach seats on a particular flight: full- fare class at $430/ticket and economy class at $216/ticket. There are 230 coach seats on the aircraft. Demand for full-fare seats is listed in the following table. Economy-class customers must buy their tickets three weeks in advance, and these tickets are expected to sell out. 1. How many seats should be set aside for full-fare class customers, that is, what is the protection level? And what is the booking limit for low- fare seats? (20 marks) 2. Suppose that unsold seats may sometimes be sold at the last minute at a very reduced rate. Will the optimal protection level calculated in (a) be higher, or lower, or the same? Provide your justification. (10 marks)
Demand distribution Full-fare demand Probability (Q) Prob(demand=Q) 40 0.1 41 0.05 42 0.05 43 0.1 44 0.1 45 0.1 46 0.1 47 0.05
48 0.05 49 0.05 50 0.05 51 0.1 52 0.025 53 0.025 54 0.025 5 55 0.025