Central Airlines Seating and Revenue Optimization
Central Airlines would like to determine how to partition their new aircraft serving Fargo to Minneapolis passengers into first-class seats, business-class seats, and economy-class seats. The plane has room for 190 economy-class seats if they do not partition any sections for first class and business class seats. First-class seats and business class seats take the space of 2 and 1.5 economy class seats. A first-class ticket yields revenue of $1,600, a business-class ticket yields revenue of $1,100, and an economy-class ticket yields a revenue of $500.
Recent global economic shifts, including President Trump’s proposed tariffs, have created uncertainty in business and personal travel. These trade policies may affect demand for flights especially business-class and first-class seats due to volatility in international business activity, tightened corporate travel budgets, and shifting consumer behavior. As a result, Central Airlines hired Nyan Inc who modeled demand uncertainty using three demand scenarios High, Medium, and Low each with known probabilities, based on updated market data.
How should the airline partition the aircraft into the three seat classes to maximize their expected revenue?
What do the shadow prices tell you for the LP solution in Excel?
Provide your mathematical model in addition to the excel solution.
The intensity of Passenger Demand $1,100
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