In a number of advance purchase contracts, it is possible to get a lower rate by committing to a purchase quantity. This happens, for instance, when you make a booking for catering of an event such as a corporate retreat. In the example considered here, a local resort where you want to organize an event requires that you specify in advance how many people will be there (call this the order amount). It charges a discounted per person price of $150 for this amount. There are no refunds if fewer people show up. However, the resort will accommodate last-minute requests for additional attendees at a cost of $250 per person. As the organizer, you are trying to minimize the cost of the event.
In the past, there has been considerable variation in the number of people who show up. After some thought, you decide that no fewer than 125 people will show up, that the most likely number showing up will be 175, and the maximum number showing up can be 275. Hence you decide to model the number of people showing up using a triangular distribution with these three parameters. This distribution can generate a non-integer number of people showing up – so round to the nearest integer.
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