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Southwest to Stop Overbooking as United Uproar Echoes

bloomberg.com

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Re: Southwest to Stop Overbooking as United Uproar Echoes

#301

Post by yazan94 »

tomerico wrote: post #217
dopu wrote: post #199

Earlier quoted context omitted.

The problem is overbooking, though. Corporations are getting preferential treatment by being allowed to sell services which they're not going to fulfill. The boner people on HN have for objectivism really does get quite old.

Overbooking makes air travel more effective than, with less empty seats and less pollution per passenger. The way it eas handled can definitely be improved, but you can't argue that it is inherently bad.

I'm not a frequent flye but I would really appreciate some clarification on this topic. How does an airline selling more than the number of physical seats it has increase efficiency/effectiveness more than if it sold the same number of tickets as the number of seats available? Do they have that big of a problem with people canceling flights? What are the return policies usually for flight tickets?

Re: Southwest to Stop Overbooking as United Uproar Echoes

#302

Post by yazan94 »

ouid wrote: post #245
stephenr wrote: post #227

Earlier quoted context omitted.

> Overbooking makes air travel more effective than, with less empty seats and less pollution per passenger > but you can't argue that it is inherently bad. You're simplifying things a bit too much. You can't go from: - We want to make air travel more cost effective, and less damaging to the environment. And arrive at: - The only way to achieve this, is to sell more tickets than we have physical seats for, to ensure t…

it uses less fuel per passenger to ensure that every flight is jam packed. It's more efficient and everybody wins. There are almost no examples of situations that overbooking + auctions doesn't solve. I think you don't understand the law as it currently exists, because what happened on that united flight was in clear violation of that law. They didn't deny the man boarding, they deplaned him. This isn't something the…

Can you explain what you mean by the overbooking + auction system? I don't fly often and though the news has left a bitter taste in my mouth about United, I do want to understand how their system works and their flaws in a less biased way.

Re: Southwest to Stop Overbooking as United Uproar Echoes

#303

Post by SilasX »

dx034 wrote: post #298
SilasX wrote: post #111

Earlier quoted context omitted.

Yeah, but the problem is that most tickets are now, in effect, standby, but not labeled as such. Hence why the parent suggested making the status (and the option to upgrade) clearer and more readily available.

According to the article, 4% of planes are overbooked. And if they are, It's rather that thanks to the internet we know of stories like these. 10 years ago no one would've known.

I say that you're "effectively on standby" when there's a potential for the overbooking to keep you off the plane, which is the kind of risk that should be made explicit.

Re: Southwest to Stop Overbooking as United Uproar Echoes

#304

Post by mikeash »

darklajid wrote: post #300
nommm-nommm wrote: post #283

Earlier quoted context omitted.

Completely irrelevant. We aren't talking about Germany or driving to other countries, that's totally different. We are talking about travel within one's own country. I would expect rental car companies to limit travel to foreign countries.

Nice use of 'we' there. I implore you to read the post I specifically replied to once more. That post explicitly talks about crossing country lines.

Well, this whole subthread is about an American airline operating in the US. (And yes, you can potentially drive a car across an international border from the US!)

Re: Southwest to Stop Overbooking as United Uproar Echoes

#305

Post by Veratyr »

kalleboo wrote: post #264
ajmurmann wrote: post #233

Earlier quoted context omitted.

I listened to a radio interview many years ago with a physicist who had done simulations to find the optimal boarding strategy. Once he explained it it was totally obvious. The biggest time waster is waiting for people in front of you to finish putting up their luggage so that they step out of the ail and you can get to your seat. The boarding strategy most airlines employ of boarding people at the same time who sit…

Mythbusters also did a segment on boarding efficiency. Their conclusion that "back to front" boarding was the slowest, and "no assigned seats" was the fastest, but that passengers hated boarding with no assigned seats. Window-middle-aisle boarding was second-fastest. My experience is that American passengers are just terrible. Planes here in Japan board so quickly in comparison, with a standard back-to-front boarding…

Is it accurate to say that Japanese are just used to orderly boarding in general? I haven't visited yet but just watching the amount of order and efficiency at train stations on YouTube is crazy compared to the US.

Re: Southwest to Stop Overbooking as United Uproar Echoes

#306

Post by nommm-nommm »

darklajid wrote: post #300
nommm-nommm wrote: post #283

Earlier quoted context omitted.

Completely irrelevant. We aren't talking about Germany or driving to other countries, that's totally different. We are talking about travel within one's own country. I would expect rental car companies to limit travel to foreign countries.

Nice use of 'we' there. I implore you to read the post I specifically replied to once more. That post explicitly talks about crossing country lines.

We = this article and the commenters on this article. We are commenting on travel between two US states, nothing to do with crossing country lines. The grandparent topic was, specifically, about ground transportion for four Americans from one part of the US to another part of the US.

Re: Southwest to Stop Overbooking as United Uproar Echoes

#307

Post by mikeash »

iLoch wrote: post #297
mikeash wrote: post #149

Earlier quoted context omitted.

Yes, the voucher thing is nonsense. I've been on overbooked flights before where I could have easily taken the next flight instead. I never volunteer, because the vouchers are worthless to me. Offer me cash and I'll often be first in line.

You can ask them to pay you in cash as long as you don't accept the offer before hand. They're legally required to compensate you with cash if you ask.

Surely they would just say "thanks, but no" and keep looking for suckers who will take a voucher?

Re: Southwest to Stop Overbooking as United Uproar Echoes

#308

Post by gshulegaard »

cameldrv wrote: post #138
gshulegaard wrote: post #101

Earlier quoted context omitted.

Overbooking is key for maximizing producer surplus. Whether or not that is economically advantageous to the economy as a whole is a different and more complex question. But the notion that a company maximizing it's surplus is _always_ beneficial to consumers is tricky but more likely false within the confines of my limited understanding of contemporary economic theory.

It's necessary to maximize total surplus as well. If someone wanted to get on the plane, and they took off with a seat empty, that's a deadweight loss. The guy sitting next to an empty seat is a little happier, but it's pretty minimal. United increasing the maximum bump fee completely solves the problem. Short of the apocalypse, you're going to find plenty of takers on any flight for $10k, even if it's a multiple day…

This is why I left it vague...it really is a complicated issue with several angles. That...and my Bachelors only goes so far.

That said, I think you are conflating a couple of economic principles.

> It's necessary to maximize total surplus as well. If someone wanted to get on the plane, and they took off with a seat empty, that's a deadweight loss.

I think you are confusing utility [1] with surplus somewhat here. If someone wanted to get on and they took off with an empty seat that is a loss in Utility. If the airline turns around and sells that seat to the new person that increases Producer Surplus (and conversely decreasing Consumer Surplus) to increase Utility.

I don't think this situation (empty seat) is DWL in the traditional sense [2]. The traditional DWL scenario is when producers could supply more but don't because of pricing constraints or other artificial ceilings/floors. It is definitely a marketing allocation inefficiency which results in Utility loss and I am kind of interested to see if there are better quantifications of this loss...but it isn't a DWL in surplus technically.

> Everyone then is better off. In fact, on a lot of flights, you can probably find multiple people to bump with just a token payment -- they'd rather stay another day.

It's totally possible that everyone can be better off. The issue isn't about when everyone is better off...it's when the system breaks down and you have situations where no one wants to make that trade.

> The bumped guy is happy to have the money, the last minute guy is happy to be on the plane, and the airline is happy to make $4700 extra.

This is an example of maximizing producer surplus. In my mind it's a variation of Price Discimination [3]. And while this overall beneficial situation is plausible, it isn't really overbooking.

For me, overbooking is basically selling more goods than you actually have and playing on the statistics trying to bank on people not making the flight. If you sell 30 seats and 5 people don't show, you take off with 25 people on board. If you sell 35 seats and 5 don't show, you take off with a full flight and pocket some additional revenue from the 5 no shows.

Now there is a lot of gray area since most no shows are from missed connections and so some of that additional revenue can go back into the system to allow for cheaper cancellation fees as well as accommodating rescheduling costs for these missed connections. But in general I suspect that producer surplus increases more than the gain in consumer utility.

> This works even better with a name-your-price bump question on checkin for flights that are oversold. Even if it's nonbinding, the airline now knows that it has willing passengers to bump and can keep selling tickets.

This is again, Price Discrimination but now adding information imbalance in order to help the airline more effectively Price Discriminate thereby maximizing their Producer Surplus.

Technically the United situation isn't the result of overbooking anyway...but I still think the practice warrants scrutiny. United's recent announcement to increase payouts and mileage compensation is testament to the fact that there was Producer Surplus to spare.

Like I said, all of this is speculative discussion and there is a lot of gray area. It is also plausible that overbooking results in maximizing Utility and an even handed redistribution of benefits to both producers and consumers. But I believe Producers are driven by incentives...and they don't have strong incentives to share the benefits of overbooking altruistically back to the consumer.

I fly from SFO - PDX every other weekend and consistently, no matter how early I book, Virgin America flights are cheaper than United and Virgin doesn't overbook whereas United does. Generally speaking, if United were even slightly returning the added revenue from overbooking to the consumer shouldn't their flights be cheaper than non-overbooked competitors?

Again this observation and subsequent question is anecdotal and broad...but I like it for FFT.

[1] https://en.wikibooks.org/wiki/Principles_of_Economics/Utilit...

[2] https://en.wikipedia.org/wiki/Deadweight_loss

[3] http://thismatter.com/economics/price-discrimination.htm

Re: Southwest to Stop Overbooking as United Uproar Echoes

#309

Post by gshulegaard »

jessriedel wrote: post #119
gshulegaard wrote: post #101

Earlier quoted context omitted.

Overbooking is key for maximizing producer surplus. Whether or not that is economically advantageous to the economy as a whole is a different and more complex question. But the notion that a company maximizing it's surplus is _always_ beneficial to consumers is tricky but more likely false within the confines of my limited understanding of contemporary economic theory.

Why do you think the consumer doesn't capture any of the surplus?

There is a difference between Surplus and Utility. I think there is a case to be made that this practice increases Consumer Utility and trades it somewhat for Producer Surplus...but generally speaking, Price Discrimination increases Producer Surplus (thereby reducing Consumer Surplus).

I gave a more detailed response to cameldrv.

Re: Southwest to Stop Overbooking as United Uproar Echoes

#310

Post by spullara »

loeg wrote: post #40
spullara wrote: post #27

They just need to charge people for no shows and QED.

They already do. Refundable tickets cost about twice as much as non-refundable.

Usually when you miss your flight you get credit. So non-refundable just means you can't get cash. Most times you still can use the price of the ticket on another flight in my experience.
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