An air traveler from Istanbul to Ankara have two options on Turkish Airlines: a 190 TL fare with a 50% cancellation penalty, and a 250 TL fare with a 10% penalty. Assume that the probability of...


An air traveler from Istanbul to Ankara have two options on Turkish Airlines: a 190 TL fare with a<br>50% cancellation penalty, and a 250 TL fare with a 10% penalty. Assume that the probability of traveler<br>canceling the trip is p.<br>• What is the probability distribution for the amount of money Turkish airline is going to earn for the<br>190 TL option? What is the same distribution for the 250 TL option? (Answer in terms of p).<br>• What is the expected amount of money Turkish Airlines is going to earn under two options?<br>• For what values of p does the 250 TL option yield lower expected price? What does this outcome<br>suggest about the preferable option for a typical traveler?<br>

Extracted text: An air traveler from Istanbul to Ankara have two options on Turkish Airlines: a 190 TL fare with a 50% cancellation penalty, and a 250 TL fare with a 10% penalty. Assume that the probability of traveler canceling the trip is p. • What is the probability distribution for the amount of money Turkish airline is going to earn for the 190 TL option? What is the same distribution for the 250 TL option? (Answer in terms of p). • What is the expected amount of money Turkish Airlines is going to earn under two options? • For what values of p does the 250 TL option yield lower expected price? What does this outcome suggest about the preferable option for a typical traveler?

Jun 02, 2022
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