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Statistics for Business and Economics | 12th Edition | ISBN: 9780321826237 | Authors: James T. McClave, P. George Benson, Terry T Sincich
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Overbooking policies for major airlines. Airlines overbook

Chapter 6, Problem 38E

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QUESTION:

Overbooking policies for major airlines. Airlines overbook flights in order to reduce the odds of flying with unused seats. An article in Transportation Research (Vol. 38, 2002) investigated the optimal overbooking policies for major airlines. One of the variables measured for each airline was the compensation (in dollars) per bumped passenger required to maximize future revenue. Consider the threshold levels of compensation for a random sample of 10 major airlines shown in the table. Estimate the true mean threshold compensation level for all major worldwide airlines using a 90% confidence interval. Interpret the result practically.

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QUESTION:

Overbooking policies for major airlines. Airlines overbook flights in order to reduce the odds of flying with unused seats. An article in Transportation Research (Vol. 38, 2002) investigated the optimal overbooking policies for major airlines. One of the variables measured for each airline was the compensation (in dollars) per bumped passenger required to maximize future revenue. Consider the threshold levels of compensation for a random sample of 10 major airlines shown in the table. Estimate the true mean threshold compensation level for all major worldwide airlines using a 90% confidence interval. Interpret the result practically.

ANSWER:

Step 1 of 2

Here the experiment under consideration is investigation of the optimal overbooking policies for the major airlines.

The data regarding the threshold level of compensation of a random sample of 10 airlines is given.

825

850

1,210

1,370

1,415

1,500

1,560

1,625

2,155

2,220

Using this we need to find the mean threshold compensation level using 90% confidence interval.

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