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A newly created NorthEast Airways (NE) flight from Philadelphia to Boston has 300 seats. The high fare on the flight is $800 and the restricted/low...
A newly created NorthEast Airways (NE) flight from Philadelphia to Boston has 300 seats. The high fare on the flight is $800 and the restricted/low fare is $300. There is ample demand for the low fare class but high fare demand is random. Further, the customers who buy low fares buy their tickets well in advance before high fare customers. Assume the demand for the high fare is normally distributed with mean 120 and standard deviation of 50.
Q: Suppose a protection level of 150 is chosen. What is the expected revenue from high fare passengers?
