An Airline serving Denver International Airport and Steamboat Springs, Colorado, is considering overbooking its flight to avoid flying with empty seats. Historical data suggest that the number of passengers who reserve a seat but do not show up for departure is normally distributed with mean 20 and standard deviation 8. The one-way ticket sells for $120. In case of overbooking, the airline has to pay a compensation of $300 and the net loss is $180 per ticket. According to the above information, answer questions 34-35. 1. What would be your recommendation for overbooking if a one-way ticket sells for $80 and the cost of not honoring a reservation is a free lift ticket worth $50 plus a seat on the next flight?
2. What is the expected profit per flight for your overbooking choice?