Assignment task: Korpe Airlines has a flight from London to Manchester that will be booked to capacity. The airline knows from past data that the number of customers that do not show up for the flight follows a normal distribution with mean 30 and standard deviation 15. The price of a ticket on the flight is f250, and customers are required to pay this price at the time of booking the flight.
If a customer on the flight is overbooked, the airline has a policy of getting the customer on the next available flight and giving the customer a free round-trip ticket on a future flight, which costs f600 per overbooked customer. Note that in this case, the airline retains the f250 paid by the customer at the time of the booking. The airline considers the cost of flying the plane from London to Manchester a sunk cost. By how many seats should the airline overbook the flight?