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Before watching this video, I highly recommend you watch the following two videos, if you haven't yet:
- Conceptual explanation about 2-stage optimization: • Introduction to Two-St... .
- First concrete example: • Two-Stage Stochastic O... .
An airline frequently flies a given leg between two large cities. Based on their historical data, they believe that demand for each seat class (first, business, and economy) can be in one of three scenarios (high, medium, or low) with corresponding probabilities. If the airline is considering buying a new airplane to fly this leg, what should the seat configuration on the plane be in order to maximize the average long-term revenue generated by ticket sales?