Question

On any given flight, the goal of an airline is to fill the plane as much as possible, without exceeding the capacity of the plane. In order to achieve this, the airlines routinely overbook their flights in consideration of last minute cancellations. We assume that a customer cancels his/her ticket in the last minute with probability 0.09, independent of the other customers. We also assume that the airline is not able to sell more tickets in order to replace the canceled ones. What is the probability that a particular flight will be over capacity if the airline sells 340 tickets, for a plane that has a maximum capacity of 310 seats? In solving this problem, use the Central Limit Theorem, and in particular, use the De Moivre-Laplace normal approximation to the binomial distribution (with 1/2 correction) and be very careful when you choose the boundaries for probability computation. You will also need to use the standard normal CDF table that is in the summary notes that was made available to you for use during the exams. Use this table precisely as follows: In using the standard normal CDF table, first compute the input argument for the standard normal CDF with your calculator, then round this input argument value to two decimal digits after the decimal point, and finally locate the entry in the table which corresponds to the rounded input value. If you need the value of the standard normal CDF for arguments larger than 3.49 (not available in the table), you can use 1.0000. Your final answer for the problem should have four decimal digits after the decimal point.

Answer 1

Given Information:

The probability that a customer cancels his/her ticket in the last minute is 0.09, independent of the other customers and the probability that a customer does not cancels his/her ticket in the last minute is .

Let X denotes the number of people who showed up for the flight that is the customers who did not cancel their ticket.

The mean number of people who showed up for the flight is given by:

The standard deviation of people who showed up for the flight is given by:

The conditions for normal approximation to binomial are satisfied as np and nq are greater than equal to 5:

and

The probability that a particular flight will be over capacity if the airline sells 340 tickets, for a plane that has a maximum capacity of 310 seats is calculated by using a continuity correction factor of 0.5 and standard normal table and is given by:

Hence, the probability that a particular flight will be over capacity if the airline sells 340 tickets, for a plane that has a maximum capacity of 310 seats is 0.4168.