JetPack Airways (JPA) operates a flight from Boston to Chicago with a total of 300 seats. There are two fare classes:
Low fare, priced at $300, for which customers typically purchase their tickets well in advance.
High fare, priced at $600, with demand being more unpredictable. The demand for high-fare seats follows a normal distribution with a mean of 100 and a standard deviation of 50. While there's ample demand for the low-fare class, the high-fare demand can vary.
JPA Airways has decided to implement a policy of overbooking. The number of no-shows has a Poisson distribution with a mean of 10. But overbooking may require bumping passengers off the flight, which has a net cost estimated at $1000 per bumped passenger. What is the optimal maximum number of reservations to accept on the flight?
Group of answer choices