ENGR.ECONOMIC ANALYSIS
ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN: 9780190931919
Author: NEWNAN
Publisher: Oxford University Press
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Consider the following airline capacity allocation problem with buy-up. The total capacity is 100.There are three classes. All class demands follow normal distribution. The fare prices and demand statistics are given as follows:

Class

Fare

Mean

Std. Dev.

1

1000

17

6

2

900

45

15

3

500

90

20

Suppose that if a class 3 demand is rejected booking, each individual has a probability of 0.3 to become a class 2 demand; and if a class 2 demand is rejected booking, each individual has a probability of 0.2 to become a class 1 demand. The airline company needs to determine the nested protection levels. Use @risk simulation optimization tofind the optimal decisions. (Please round all the simulated numbers and solutions to the nearest integer.)

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