Movie Theater has problems with its no events rates for the winter session. They

Question

Movie Theater has problems with its no events rates for the winter session. They are worried that they will be having inaccurate booking policy, which is to current overbook 3 seats in its 10 seat theater. During the last winter ACC Theater the shown below No-Show rate during the June-September sessions: # No-Events | 0 Frequency15 25 30 2010 Since ticket revenues average $100 per customer per show and expenses to operate the theater on a day flight average &600, when the theater is full ACC makes a profit of $100 x10-pays them S80 and puts them on the next movie a. Calculate the expected profit for each overbooking strategy using the Payoff Matrix approach. What would be your recommendation for overbooking for ACC? Passengers Overbooked Profit Expected Profit No Show

Explanation / Answer

I am assuming there are total 4 shows in the theater per day

So if every show is shown profit would be = 10*100*4=$4000

If one show is not shown profit = 10*100*3 = $3000

If one is overbooked then we have to pay him back $80 and a seat in another movie which will also be a loss of $100

I have calculated the strategy of overbooking up to 4

Excel formula

Please check the data again as I have calculated $600 as per day cost of theatre.

As per my calculation, the optimum strategy is no overbooking. i.e. 0 overbooking

Please comment if any doubt.

No shows 0 1 2 3 4 Frequency 15 25 30 20 10 Probability 0.15 0.25 0.3 0.2 0.1

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