solution

Question 2 (Airline Overbooking)
Suppose Antrak Air ® charges passengers GH¢405 in advance for its flights from
Kumasi to Accra. Suppose that this amount is refunded if the passenger cancels early.
The airline thus loses GH¢405 in revenue for each empty seat. If the flight is overbooked,
however, the airline pays GH¢450 per person to put each customer on another flight. This
amounts to a GH¢45 loss for each passenger it cannot accommodate. Based on historical
data, the probabilities of 0, 1, 2, 3 or 4 no show-ups are given in the decision matrix
below. Use the information to decide how many passengers Antrak Air ® should
overbook for each flight.
No. of no show-ups
0
1
2
3
4
Strategy/Probability
0.8
0.09
0.05
0.04
0.02
Overbook 0
Overbook 1
Overbook 2
Overbook 3
Overbook 4
Overbook 5
a. Fill out the table and use the information to find which alternative will be selected
if the decision criterion is Maximax.
b. Which alternative will be selected by the expected value criterion?
Provide your answers starting from this space:

Please kindly present the solution in a table form.