Service Management 7th Edition by James Fitzsimmons, Mona Fitzsimmons

Exercise 16

A commuter airline overbooks all its flights by one passenger (i.e., the ticket agent will take seven reservations for an airplane that only has six seats). The no-show experience for the past 20 days is shown below:

Using the critical fractile
find the maximum implied overbooking opportunity loss C o if the revenue C u from a passenger is $20.