Program
or comparison purposes we also ran a triangular distribution to compensate for the lack of symmetry around the expected mean, but the results were broadly similar so we will discuss the results based on the truncated normal distribution.
Results:
Original Estimate
The average total cost of the original over booking settings (5% and 20% respectively, shown in red below) is £9,154. The reason this is higher than Jane’s estimate is that hers was only a single average and does not account for all of the other possibilities that can occur. Here we considered the extreme values that are generated through the variation in the input values (no shows %) – significantly here a higher % increase in no-shows (particularly business no-shows) will result in much higher costs.
Our Recommended Overbooking Level
Evaluate the overbooking policy TransAtlantic had originally been using (i.e. not your own) using simulation analysis, taking into account the uncertainty in the percentage of no-shows in economy and business class. Recall that the percentage of no-shows in economy class is somewhere between 3% and 8%, although most people at TransAtlantic estimate it to be at
5%, and that for business class passengers, the no-show percentage is expected to be between 15% and 30%, and is thought to be 20%. What is the average (total) cost of this overbooking policy? What does this mean? Why is this different to the £6,250 Caroline’s processor estimated? What is the probable range of total cost (95% confidence)? What is the probability that the (total) cost will exceed £15,000? Now evaluate the overbooking policy you recommended in Section 2 (using the same criteria). Also evaluate the (total) costs of a policy of not overbooking at all, a practice that is employed by some airlines to guarantee a seat to a customer who has reserved in advance. Is the policy you recommended better than the other policies? Why?
Results:
Original Estimate
The average total cost of the original over booking settings (5% and 20% respectively, shown in red below) is £9,154. The reason this is higher than Jane’s estimate is that hers was only a single average and does not account for all of the other possibilities that can occur. Here we considered the extreme values that are generated through the variation in the input values (no shows %) – significantly here a higher % increase in no-shows (particularly business no-shows) will result in much higher costs.
Our Recommended Overbooking Level
Evaluate the overbooking policy TransAtlantic had originally been using (i.e. not your own) using simulation analysis, taking into account the uncertainty in the percentage of no-shows in economy and business class. Recall that the percentage of no-shows in economy class is somewhere between 3% and 8%, although most people at TransAtlantic estimate it to be at
5%, and that for business class passengers, the no-show percentage is expected to be between 15% and 30%, and is thought to be 20%. What is the average (total) cost of this overbooking policy? What does this mean? Why is this different to the £6,250 Caroline’s processor estimated? What is the probable range of total cost (95% confidence)? What is the probability that the (total) cost will exceed £15,000? Now evaluate the overbooking policy you recommended in Section 2 (using the same criteria). Also evaluate the (total) costs of a policy of not overbooking at all, a practice that is employed by some airlines to guarantee a seat to a customer who has reserved in advance. Is the policy you recommended better than the other policies? Why?