April 27, 2017

$10,000! This should be entertaining. How close to $10,000 do you think the bidding will ever go?

"United Airlines will offer up to $10,000 when a traveler voluntarily gives up a seat on an oversold flight, part of a policy overhaul following the passenger-yanking video seen around the world."

42 comments:

Karen of Texas said...

Depends. The first "passenger" to jump can ruin it. If everyone knows they'll go up to 10k, it will be interesting to see how long passengers will hold out. Bidding gets up to 1k, will someone blink? I say someone will. I'll say it will never go above 2k at the most before someone grabs that money.

Bob Ellison said...

There's an arbitrage opportunity: hire some cheap labor, research flights likely to be overbooked, buy the cheapest fares, and clean up.

mockturtle said...

How unbelievably stupid of United to announce their 'ceiling'.

Michael K said...

That was not an "oversold flight." It was the convenience of the United employees that required four paid passengers to be ejected.

Bill, Republic of Texas said...

To me the worse (worst?) part of this was United using law enforcement to settle a customer service issue. We saw it again with the lady and the stroller and the guy who had to go pee.

To me that is the issue that needs to be addressed.

Krumhorn said...

It doesn't matter whether anyone gets $10,000 or not. Just having the flexibility to pay even half that much frees up the gate agents to solve problems quickly while producing far less friction. I'm sure that assclown CEO would have much preferred the agents had offered many times $10,000 as an alternative to the fallout of seeing Dao dragged bloody down the aisle accompanied by the solid gold performance of that woman fully in frame screamed "oh my sweet baby Jesus, look at what they are doing to that poor man!!"

When he gets his $4 million recovery, he should send her 10% with warm thanks.

- Krumhorn

Ambrose said...

Payments like these are taxable income. For a few hundred, no one cares, but at $10K, I wonder if United is legally required to deliver report to the IRS? In a few years, will we have the TSA collecting W-9s from passengers at security?

clint said...

I can't tell from the article: Is it *really* $10,000 -- or is it just that much in almost-unusable "vouchers"?

I'd imagine even $1,000 in actual money would easily persuade a few people to give up their seats and take a later flight. But $10k in "vouchers" -- not so much.

Michael K said...

"But $10k in "vouchers" -- not so much."

Maybe vouchers for Southwest would do it.

David said...

Not very near.

J2 said...

A plane full of game theorists should see.

Matthew Sablan said...

"A plane full of game theorists should see."

-- Two people coordinate to drive the bidding up to $10k and split it, $5k each is probably the best, though I assume there are some rules about not doing that.

Amexpat said...

I doubt they will ever have to go up to 10K. I think the most attractive offer would be a mix of cash (most people would accept $1000) and either a nice hotel or an upgrade on the next flight.

Some airlines use Optiontown a service that gives a small cash payment($5) up front when you book if you're willing to be flexible and a larger payment if you're moved to an alternative flight.

I'm sure there are lots of other ways of handling overbooking that will be cost effective and make the passenger who gives up the seat satisfied.

Brando said...

Just because the airline can go up to $10K, does that mean they have to? Couldn't they just say after it hits $2K "that's it, no takers, so we're bumping people randomly"?

And knowing that, if they have the flexibility to go up a bit, surely they'll find some takers for whom the hassle of getting moved is worth the money. But it has to be real money, not a voucher. Do that and some slacker hippie will happily take the scratch.

Brando said...

"Maybe vouchers for Southwest would do it."

That, I'd take. But then a lot of people (including me) don't fly very often, so a voucher has limited value. Cash, though, is a lot more solid--do that and a nice hotel and meal, upgrade to first class on next flight, use of airline VIP lounge--a combination of these things will definitely get you volunteers. Sweeten the deal! Obviously the reason they get so few takers these days is the offer is simply not worth it.

rhhardin said...

Nowhere near. Passengers are bidding against each other and there are a lot of them.

If you're going to bid multiple seats, I'd run it that everybody gets the same highest price.

So the optimal bid for passengers is the lowest bid they're actually happy with, and then those who bid get what the last guy gets. The pressure is really on to jump in as the last guy or you get nothing.

MadisonMan said...

I've seen Delta go up to $1200 -- this for a packed flight back to Madison on Thursday night. I doubt airlines would ever get far beyond a $1500 offer -- so the price would never get to $10K, although it makes a nice headline.

IME Delta gives out vouchers for big planes (F/G gates of MSP, DTW), but if you're bumped from a CRJ (B gates of MSP), you're more likely to get a gift card, at least that's been my experience.

I have two vouchers to use by next month. When you fly a lot for work, the last thing you want to do is fly more.

Original Mike said...

United also said it would:

Limit the use of law enforcement on a plane, except for safety and security reasons.
Stop forcing passengers already seated to give up their seats, except for safety or security reasons.
Come up with creative solutions for finding alternative transportation for passengers who have been denied boarding, such as flying them from nearby airports, putting them on flights of rival airlines or using ground transportation.
Ensure airline crews book a seat at least an hour before departure.
Provide employees with additional annual training.
Create an automated system for soliciting volunteers to change travel plans before they take their seat.
Reduce the amount of overbooking.
Empower employees to resolve customer service issues on the spot.
Cut the red tape that passengers face when reporting lost luggage.


This is more like it. I especially like "reduce the amount of overbooking" and taking responsibility to help the people who they do bump.

madAsHell said...

How unbelievably stupid of United to announce their 'ceiling'.

They're desperate to generate good publicity. You and I will never see anything beyond $1500.

rhhardin said...

The ceiling is a limit on the authority of the auctioneer.

It's high enough so it will never be reached. It functions as no limit at all.

rhhardin said...

The idea is that if it gets to 10k, there's something wrong.

Darrell said...

How about a $10,000 donation in your name to the Clinton Foundation?

Ann Althouse said...

Once you know they can go up to $10,000, it affects what you think of an offer of, say, $1,000.

How long will the whole group hold out, waiting for the offer to get up close to what we know you could get if everyone holds out?

rhhardin said...

The whole group isn't going to hold out. Only one of them gets the money. You have to underbid him to get the money.

So in the end you'll bid at whatever amount you're first happy with. You'd be happy and if you wait somebody else will get it.

rhhardin said...

The price won't change from what it came out before. People already knew that they could be underbid and guarded their happiness by bidding when they're happy.

Original Mike said...

"How long will the whole group hold out, waiting for the offer to get up close to what we know you could get if everyone holds out?"

There is no "group" because there is no group payout. There is a collection of individuals.

Thorley Winston said...

How unbelievably stupid of United to announce their 'ceiling'.

Agreed, the better strategy would have been a noncommittal “we are investigating the situation and determined to do everything we can to prevent such incidents in the future” response and just wait for the news cycle to change. No one who wasn’t directly involved is going to care about this by Memorial Day.


Dust Bunny Queen said...

How unbelievably stupid of United to announce their 'ceiling'.

Truly. All you need is two or three passengers to make and arrangement. Passenger 1 doesn't care if he goes on the flight or not. 2 & 3 do but they are willing to bid up the price and split with #1.

60% for #1 and 2 & 3 can split the remaining 40%. 6k to miss a flight I didn't need to take anyway and the shills....I mean 2 & 3 get 2K each for just "helping out". A team effort....go team!!!

Where there is a will....there is a way. United effed up!

Original Mike said...

"All you need is two or three passengers to make and arrangement."

Yeah, but Passenger 4 who is not part of the cabal is happy at $2k and he gets it. Passenger 1, 2, & 3 get bupkas.

I'm just happy there will be other passengers who will step up and let me get home on time.

Original Mike said...

"Agreed, the better strategy would have been a noncommittal “we are investigating the situation and determined to do everything we can to prevent such incidents in the future” response and just wait for the news cycle to change. No one who wasn’t directly involved is going to care about this by Memorial Day."

I don't know. Personally, after that incident there is no way in hell I would have booked United, given a choice. Now, with the list of things they published, I'd be inclined to look at them first. Especially important to me is less bumping and the pledge to help you if you do get bumped. I don't care about the money; I booked the flight to get to my destination, not try and make a couple thousand dollars.

Michael said...

DBQ

The beauty of that game is marred by the fool who will try to "help" the airline and cave at $500. There usually aren't three sophisticated enough to play this on a typical flight.

I was in the USVI last week and there was chaos at the airport when a flight to JFK was overbooked . They were up to $2,500 and no one was taking. They needed 13 (!) volunteers. That was going to be an expensive trip for American.

Delta has also announced a ceiling of 10K. But these auctions start very low.

I had a friend who booked his entire family on European fligths that almost certainly would be overbooked. They took several free trips to Europe for their efforts.

Bruce said...

"The ceiling is a limit on the authority of the auctioneer.

It's high enough so it will never be reached. It functions as no limit at all."

This is exactly right. It's like those car dealership ads that say "If we can't beat our competitor's price, we'll give you $10000!" I can guarantee you that they have never, ever, paid anyone $10000. It is a statement that sounds dramatic, but that actually promises nothing.

In a group of a couple hundred passengers, there will nearly always be someone willing to be bumped for $1000 or $1500 (and understandably so). They will never get even close to the $10000 limit.

Earnest Prole said...

How long will the whole group hold out, waiting for the offer to get up close to what we know you could get if everyone holds out?

Theoretical human beings would hold out for the whole $10,000. Actual human beings will hold out for a couple hundred dollars more than they would like to put in their pocket, which means the bidding will rarely exceed $1,500 and never go beyond $2,500.

In theory there's no difference between theory and practice.

Unknown said...

It will never go above $1000. It is the prisoner's dilemna in classic form. One person wins $10,000 but only if 100 people don't cheat. But those who don't accept less than $10,000 get nothing.

tim maguire said...

I think a website will track the average buy out and then that average will slowly creep up until it hits about $8,000.

Tom said...

I just got $1,000 from Delta for volunteering.

Earnest Prole said...

It's eye-opening to see highly educated people admit they have no grasp of market economics.

Ann Althouse said...

"There is no "group" because there is no group payout. There is a collection of individuals."

They must hold together as a group to cause the amount to go up. As soon as someone defects, the game is over.

I refer to the group because they have to stick together and behave collectively to bid up the amount, which of course only one person gets.

William said...

I would guess that the bidding would seldom get past the $1000-$2000 range, max. Lots of people will be happy to take a bump at that point.

Original Mike said...

"They must hold together as a group to cause the amount to go up. As soon as someone defects, the game is over."

Yeah, no kidding. With all due respect, that's why they'll never get near $10k.

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Kirk Parker said...

I have a completely different take on this.

There aren't enough commercial flights that depart from private airports to make a difference, right? (I suspect the number is actually zero.)

This should give the government enough authority to simply legislate that overbooking is contrary to public policy, and that any person bumped from a flight from which they had a confirmed, paid seat has a rebuttable presumption of breach-of-contract against the carrier.