Answer Happy

. You operate a rental car company where you offer two rates for
customers. You
charge any customers who reserve a car at least one week in
advance, a flat rate
of $180 to rent a car for the weekend. Any customers who place
their reservation
within one week of the rental period are charged a higher,
“close-in” reservation
price of $300 to rent a car for the weekend. You have 50 identical
cars available
for rental. You estimate that the number of customers who will
place their
reservation late (i.e. within one week of the rental) is uniformly
distributed between
4 and 15.
a) You have already accepted reservations for 40 car rentals during
the weekend
of May 28 th . You have the ability to close the reservation portal
and prevent
more customers from placing reservations until the week before May
28th . You
are certain that if you do not close the portal, you will
completely book all 50
rental cars at the normal low price of $180. If your goal is to
maximize expected
revenue, should you keep accepting reservations at the normal price
or should
you close the portal and reserve the remaining cars for “close-in”
reservations?
Keep accepting normal price reservations
b) In general, how many cars should you save for “close-in”
reservations?
Save 8 cars for close-in reservations
c) What is the expected number of “close-in” bookings placed for
the weekend of
May 28 th if you follow the strategy from part b)?
7.17 close-in bookings
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