TED-ED: Why do airlines sell too many tickets? - Nina Klietsch

The video discusses overbooking, a practice where businesses sell more than their capacity to optimize resources and increase profits. Airlines are a common example, using statistical models to predict no-shows and maximize revenue. The video explains the calculations involved, including the use of binomial distribution to assess probabilities and expected revenue. It also addresses the ethical concerns of overbooking, questioning the balance between practicality and ethics.

Why do businesses, particularly airlines, practice overbooking?

• To ensure all customers are satisfied

• To avoid penalties from customers

• To reduce the number of flights

• To increase profits and optimize resources

What statistical tool do airlines use to predict the number of passengers who will show up for a flight?

• Exponential distribution

• Normal distribution

• Poisson distribution

• Binomial distribution

In the example provided, what is the cost of bumping a passenger?

• $1000

• $250

• $500

• $800

How do airlines determine the number of extra tickets to sell?

• By selling as many tickets as possible

• By guessing based on past experiences

• By using statistical models to maximize expected revenue

• By ensuring no passengers are bumped

What ethical question is raised by the practice of overbooking?

• Is it right to prioritize frequent flyers over others?

• Is it fair to charge different prices for the same seat?

• Is it ethical to sell the same resource to multiple people?

• Should airlines offer free flights to all bumped passengers?