How Delta masters the game of overbooking flights (free markets not force)

[Timshel]

Well by that logic all government would be "Big Government". That's just anarcho-libertarian nonsense rhetoric.

Nope. The legitimate purpose of government is to secure individual rights (see DofI).

Did I suggest there should be no cop? I did not. I said cops should protect individual rights.

You are the only one talking nonsense Mott.

 

[SmarterthanYou]

Nope. The legitimate purpose of government is to secure individual rights (see DofI).

nice to have you back, string. us freedom lovers have missed you.

 

[Timshel]

Has it occurred to you that there were a vast array of peaceful outcomes that would not involve the market at all? Like...guess no one will get off...ok...lets fly to Louisville.

Are you suggesting they would have their employees do what, get off the plane, stand, ride in luggage or strapped to the wing?

 

[USFREEDOM911]

united went the cheap route. They stopped offering at 800$ and instead offered to forcibly remove the person. They made a judgement call that the bad pr would be worth less than 800$.

Which is being realized, now that there stock dropped; way more then $800.

 

[USFREEDOM911]

Excellent column from The Grumpy Economist on the United situation and personalized tickets to price discriminate. I hadn't thought of it from this perspective.



Commentators seem to have noticed a lot of the economics of the United fiasco: Yes, don't stop auctions at $800. (WSJ review and outlook.) Yes, if you need employees at Louisville so badly, call up American and buy a first class ticket. Book a private jet. Or, heck, you're an airline. Bring up another plane. Don't drag people off planes to save a measly $500.

The one economic point that I haven't seen: the whole issue also comes down to airlines' use of personalized tickets to price discriminate. (And most of the TSA's job is to enforce that price discrimination by making sure you are the name on the ticket.) If you could resell tickets, the problem would go away. Then the airline must sell only as many tickets as there are seats on the plane, as concerts do. If people aren't going to show, they put their tickets on ebay -- or another quick peer to peer ticket trade platform -- and someone else buys them. Including the airline, if it wants to send employees around. Standby disappears -- want to get on the plane? Bid for a ticket. We still get efficiently full planes -- fuller, even -- nobody ever gets bumped, and the auction for the last seat is going on constantly.

Yes, one of the hardest lessons in economics is that price discrimination can be efficient. Business class cross subsidizes leisure and pays for fixed costs. But the airlines could speculate in their own tickets as well, so its' not clear in a data mining race that scalpers would reap the price discrimination profits better than the airlines themselves.

Holman Jenkins adds, in a brilliant column,

While we’re at it, what’s wrong with Chicago airport security? Did not a single officer say, “I’m having no part of this. If United can’t deal with its
overbooking mistakes in a civilized, non-cheapskate way, how is it my job to manhandle innocent customers?” This also smacks of our national malaise
—police who need an armored personnel carrier before they’ll roll up and serve a warrant, who wait outside Columbine High until they’re sure the
shooting has stopped.

And do not the other passengers rebel at seeing such treatment? Well, maybe not the first time, but I suspect the next time they try to drag a customer off an overbooked plane, there will be a riot.


http://johnhcochrane.blogspot.com/2017/04/united.html?spref=tw&m=1

I wonder how many First Class passengers were considered to be "bumped"?

 

[USFREEDOM911]

Are you suggesting they would have their employees do what, get off the plane, stand, ride in luggage or strapped to the wing?

Book them on a different airline, rent them a car, put them on a bus, call a taxi, etc.

It would have ended up costing them less then they're probably going to end up paying out and probably wouldn't have resulted in millions being lost in stock.

 

[Timshel]

Book them on a different airline, rent them a car, put them on a bus, call a taxi, etc.

It would have ended up costing them less then they're probably going to end up paying out and probably wouldn't have resulted in millions being lost in stock.

I don't think that's what Mott is suggesting. All of those actions use free markets to provide a solution.

Has it occurred to you that there were a vast array of peaceful outcomes that would not involve the market at all? Like...guess no one will get off...ok...lets fly to Louisville.

 

[Althea]

and in the event of a refusal to accept?????

Normally, when they have a real issue with over booking, they'll make the offer at the gate. I would imagine that if nobody wants to get bumped, those who were booked last are the ones that need new accommodations.

 

[Althea]

I wonder how many First Class passengers were considered to be "bumped"?

None. First class, and frequent flyers are never disturbed. They look at the date of the booking, and the price paid. I'm guessing Travelocity customers are the first to get a beating.

 

[zymurgy]

the free market doesn't exist here. government regulations already cap payouts based on delay length.

Companies like Delta are likely exploiting travelers that don't know the rules by not explaining their options to them. I'm certain this guy didn't have his options explained.

https://www.law.cornell.edu/cfr/text/14/250.5

 

[Althea]

the free market doesn't exist here. government regulations already cap payouts based on delay length.

Companies like Delta are likely exploiting travelers that don't know the rules by not explaining their options to them. I'm certain this guy didn't have his options explained.

https://www.law.cornell.edu/cfr/text/14/250.5

I'm quite sure that airlines can pay more than the $1350 cited in that law. Who's going to complain?

 

[zymurgy]

I'm quite sure that airlines can pay more than the $1350 cited in that law. Who's going to complain?

why would they pay more? government decree set their legal obligation ceiling $1,350.

they just try to get passengers to agree to less - I have never heard of them paying more

 

[Timshel]

the free market doesn't exist here. government regulations already cap payouts based on delay length.

Companies like Delta are likely exploiting travelers that don't know the rules by not explaining their options to them. I'm certain this guy didn't have his options explained.

https://www.law.cornell.edu/cfr/text/14/250.5

Delta is still using free markets, constrained though they may be, to solve this. Wherever there is a voluntary exchange of goods and services there is a free market. The $1350 cap, which should be removed, just limits the options of buyers and sellers in the free market.

The cap should be removed because it would obviously make something like this (after boarding) harder to settle.

 

[Timshel]

why would they pay more? government decree set their legal obligation ceiling $1,350.

they just try to get passengers to agree to less - I have never heard of them paying more

They will occasionally go over it with other freebies. I don't know if there is a penalty for exceeding it.

http://www.travelandleisure.com/airlines-airports/flight-volunteering-compensation

Let's deregulate it! I am guessing the regulator failed to consider the affects boarding would have on the ability of the market to find a price under that limit. But why have a limit at all? Any limit we choose would fail to consider some other factor that might raise the price. Let the free market do it's thing and it will find a price.

 

[zymurgy]

Delta is still using free markets, constrained though they may be, to solve this.

you can't claim free markets when government intervention sets prices

Wherever there is a voluntary exchange of goods and services there is a free market. The $1350 cap, which should be removed, just limits the options of buyers and sellers in the free market.

right - it ceases being voluntary and the parties involved aren't even able to settle via courts or arbitration. When government set the damages ceiling - it gives power to the airlines and removes power from the consumer

 

[Timshel]

you can't claim free markets when government intervention sets prices


right - it ceases being voluntary and the parties involved aren't even able to settle via courts or arbitration. When government set the damages ceiling - it gives power to the airlines and removes power from the consumer

It does not set the prices. It sets a limit on the prices.

That limit exacerbated the problem in the United case because the free markets ability to find a price was arbitrarily constrained. But under normal conditions, like those faced by Delta in the article, where the prices are agreed to freely before boarding, the limit may only occasionally have any practical effect.

They should get rid of it.

 

[zymurgy]

It does not set the prices. It sets a limit on the prices.

setting a cap is a form of setting prices. They receive government protection enabling them to overbook flights as they know damages are capped and not done in a free market manner.

 

[Mott the Hoople]

None. First class, and frequent flyers are never disturbed. They look at the date of the booking, and the price paid. I'm guessing Travelocity customers are the first to get a beating.

That's not true. There was a follow up story of a first class traveler who was bumped from first class by a more important customer (Uniteds term, not mine.)

 

[Mott the Hoople]

They will occasionally go over it with other freebies. I don't know if there is a penalty for exceeding it.

http://www.travelandleisure.com/airlines-airports/flight-volunteering-compensation

Let's deregulate it! I am guessing the regulator failed to consider the affects boarding would have on the ability of the market to find a price under that limit. But why have a limit at all? Any limit we choose would fail to consider some other factor that might raise the price. Let the free market do it's thing and it will find a price.

It's a silly point. Any solution is better than beating a customers ass and dragging them off the plane. That's my point.

 

[Timshel]

setting a cap is a form of setting prices. They receive government protection enabling them to overbook flights as they know damages are capped and not done in a free market manner.

I agree, it's a protection for the airlines and we should get rid of it.

It is a form of setting a cap on prices or a limit. It does not set prices.

In the article Delta freely agrees to prices with passengers typically well below $1350. Those are all free market transactions.

I am sorry if you and Mott have some sort of knee jerk reaction to the term "free market" but orthodox economists don't share your (Marxists?... idk probably just ignorance) bias.