It’s time for some game theory, United Airlines edition

by on April 12, 2017 at 1:00 am in Current Affairs, Economics, Law, Travel, Uncategorized | Permalink

I agree the man should have left the plane in the first place, the police should not have used violence, the CEO should have apologized right away, United (possibly) should have known earlier it needed to transport the employees, and a bunch of other things.  Perhaps United should have mimicked Ryan Air and charged people fifteen euros (or much more!) for dragging them off the flight.  But let’s put that behind us and consider some analysis:

United policy says:

The priority of all other confirmed passengers may be determined based on a passenger’s fare class, itinerary, status of frequent flyer program membership, and the time in which the passenger presents him/herself for check-in without advanced seat assignment.”

There is also an exception for disabilities.

From the passenger’s point of view, this operates like randomization, as customers were told “the computer will decide.”  An alternative of course is to eliminate the random shuffle and require cash payments to passengers no matter what, waiting until someone volunteers to give up his or her seat at the required high price.

One problem with using money to buy people out of queues is that it encourages more upfront queuing to begin with, and that involves negative externalities for passengers as a whole.  In any model of stochastic demand and fixed capacity in the short run, demand will sometimes be too high, and I don’t know of many retail markets that rely on price alone to ration quantity.  Given that reality, I am not sure why everyone is insisting the airlines should do things this way.  If Nordstrom starts to run out of their blue cooking pots on the day of the sale, so be it, they don’t raise the price toward the end of the day as supplies dwindle.  Paying $5 to each denied pot-buyer just ensures they are more likely to run out of pots the next time around.

You could spend many moons debating whether price-only solutions to short-run shortages lead to higher or lower upfront prices (and thus higher or lower deadweight loss) than price + quality adjustment solutions to short-run shortages.  As far as I know, this question hasn’t been settled, and quality adjustment is well-known as a means of enabling more upfront price discrimination.  If nothing else, it pushes more people into business class.  The subtler mechanism is that the airlines have plenty of reasons to favor their more loyal customers, if only because of market segmentation, and this is one of them.  The market segmentation effects brings more collusion, and higher prices, but the price discrimination effect tends to boost output.

To consider possible analogies, let’s say it was a queue to buy concert tickets, with more people in line than seats for the show.  One option is to give cash to those who can’t get tickets, rather than just turning them away, but I’ve never heard anyone argue this would be efficient.  The cash payments are a tax on product supply and also they encourage too much queuing in the first place.  Instead we send some people home without tickets, even if they have waited in line for a long time.  In essence, randomization is one factor behind who is sent home without a ticket, because no arrival, when deciding whether or not to show up, knows exactly how many other people will have been prior in line.  Don’t be surprised if the airlines sometimes use a similar system.

As Garett Jones points out, sometimes the ATM runs out of cash and you don’t get any bonus afterwards.  There are plenty of other examples.

Maybe United should allow for a secondary market for the doctor to stay on the plane by buying flying rights from some other passenger, one who wouldn’t take the United offer but who might take the doctor’s better offer.  That idea is worth consideration, though arranging the contract could be tricky unless the passengers belong to a common system with pre-arranged arbitration in place (Facebook could run it?  PayPal?)  With tickets this kind of resale works smoothly through StubHub and the like.  (By the way, once the guy proclaimed he was a doctor going to see his ailing patients, did any of the other passengers offer to get off instead?  Hmm…)

The “re-accommodation” seems much worse to many people because the doctor already was seated.  An endowment effect argument therefore might require that the airline use a full auction once seats are taken.  That would increase the incentive of the airline to spot demand-supply imbalances in advance of boarding, and it might well be a good idea.  On the other hand, the presence of an endowment effect can help make “removal” an especially effective pre-emptive demand tax in world-states of potential excess demand.  The more you hate being removed from your seat, the fewer people have to be removed to achieve a greater S-D balancing ex ante.  Furthermore, the highest valuation buyers will make sure to be loyal buyers, which presumably is what the airline wants.

The cynical, who have studied randomization in optimal tax theory (that is not I, I love human rights too much and spent my youth reading the Salamancans), would even say that the higher value are the trips, and the more people fear being manhandled, the more it makes sense to use stochastic pain as a deterrent for overbooking.  Think of it as a way to increase the degree of ex ante price discrimination, and limit cross-buyer externalities, at minimal cost in terms of actual output.

Finally, the United episode gets at a more general problem with algorithms.  Even if the selection of seat loser is “truly random,” it will not always look random to the outside world.  The bumping of the doctor has been a huge event on Chinese social media, and how many of those Chinese are thinking that the doctor was bumped because he was Chinese.  The international loss of reputation here is significant, and it damages the United States as a whole, not just United as a brand name.  In essence, individual companies under-invest in perceptions of fairness, and reliance on “truly random” algorithms can make this worse rather than better.  A deliberate human chooser might well have done better, if only by knowing that a public defense of the choice would have been required, and that might have nudged United back toward the full auction or some other solution.  In essence, companies may be oversupplying “reliance on randomness,” not taking the collective negative externality into account.  Counterintuitively, relying on algorithms can increase perceptions of unfairness, and many of the costs of unfairness come on the perceptions side, even if “the true model” is making choices using a fair process.

Two other factors are worth considering.  First, due to social media it will be increasingly difficult to write and enforce retail contracts with legal meanings very different from their “common sense” meanings.  Maybe I’ll write a separate post on whether that will raise or lower transactions costs, but I suspect a bit of both.

Second, given that the stock of United tanked after the incident, now airline customer service will improve rather rapidly.  In the long run of course that will translate into higher prices too, so the net effect of this shift will prove regressive.  The more you complain, the more you are redistributing wealth — through the medium of preferred price-quality configurations — away from lower earners and toward the wealthy.

I’m not saying that the United rules are efficient, either generally or in this particular case, but I do see many people not even willing to ask the question of under what conditions they might be efficient.  And that is indeed to correct way to start on analyzing this problem.

Addendum: This is also a story of price controls, on that let’s turn the microphone over to Air Genius Gary Leff:

More importantly, United didn’t do it because Department of Transportation regulations set maximum required compensation for involuntary denied boarding (in this case 4 times the passenger’s fare paid up to a maximum of $1350). So they’re not going to offer more than that for voluntary denied boardings, especially since the violent outcome here wasn’t expected and the United Express gate agent had no authority to do more.

1 "Doctor Dude" was wrong April 12, 2017 at 1:16 am

Good analysis Tyler. I am not sure, though. This is a story of a human being – who has grandchildren, who is loved by God, who is admirable in a thousand ways – but who made a mistake. A hundred years from now we will wonder why were willing to argue and make excuses on behalf of the faults of people who are willing to make spectacles of themselves with absolutely no compassion for others. We should, of course, argue as much as we can on behalf of those who are faced with unexpected adversity and fail – but we should know why. First, we should understand – and understand in a humane way – why it was wrong for self-centered “Doctor” Dude (real doctors do not act that way) to not spend one single second wondering whether his victim act was selfish? I am not saying even two or three seconds – just one second? Did he spend a single second worrying about the bad impression he would leave on the young poplin that plane? No I think he did not. I would love to be wrong: if “Doctor Dude” were my son I would stand up for him: but those who hate on United should ask themselves whether the people who spend their whole lifetimes trying to get people safely from one place to another, often places so far apart as to be astounding, should be criticized for working so hard while self-centered Doctor Dude gets all the worthless sympathy of those who neither care nor bother to wonder why they do not care. “Doctor Dude” signed a contract that allowed him to get on a plane under only some circumstances: he made a selfish spectacle of himself when the odds went against him. Nice guy, overall, one hopes, but still — why could he not have done the right thing?

2 Ethan Bernard April 12, 2017 at 1:24 am

“real doctors do not act that way”

Yeah right. Enough of this doctor worship. See also “no true scotsman”

3 Roy LC April 12, 2017 at 1:28 am

People like you are why the Mindy Kaling Project did so poorly. Focus groups showed that the public could not believe that a real medical doctor would behave like that..

4 "Doctor Dude" was wrong April 12, 2017 at 1:29 am

Mindy Kaling is adorable, for the record.

5 "Doctor Dude" was wrong April 12, 2017 at 1:36 am

Super adorable, actually.

6 Roy LC April 12, 2017 at 1:42 am

Well at least you are not wrong about everything.

7 "Doctor Dude" was wrong April 12, 2017 at 1:54 am

Roy LC – You realize of course that the only reason I bothered to comment was to lead up to the phrase “Mindy Kaling is super adorable”? Do you really think I care one way or another about the stochastic details of consumer law as expressed in episodes that every one involved wishes were forgotten? That is not what consumer law is for!!!! “Doctor Dude” has my best wishes as does United. But Mindy is so so underrated!!! (as a celebrity – non-celebrities like angry Doctor Dude and the poor ‘well we had a contract’ United dudes are also probably underrated – but the odds are they have nice homes and people who love them. See how it works?) Or maybe we only make these comments to gladden Tyler who gets to wake up and see how hard we worked in the middle of the night to say something Falstaffian about the grandpa Doctor Dudes who made their little marks on the anecdotal history of contract law, bless their hearts, and something just as Falstaffian about the super adorable Mindy Kalings of the world.

8 Brent Wheeler April 12, 2017 at 2:44 am

The best thing about this post is it reminds us of how strong Tyler’s analysis can be in (relatively) conventional analysis and application of economic ideas versus various speculation about food and various esoteric matters…… or perhaps tells us that similar analysis underlies that?

9 Alan April 12, 2017 at 6:49 am

Doesn’t the fact that the airlines control the “Demand” by only selling a sufficient number of seats mean this is all about how many angels can dance on the head of a pin? I mean, they don’t have to sell more tickets than seats at all if they don’t want to. So the rest does not follow.

And they should certainly be allowed to offer cash to get a “volunteer”.

10 Alan April 12, 2017 at 6:55 am

Just noticed that Rohan Verghese explained this before me below. I think Tyler should address this failure if it be one.

11 Boonton April 12, 2017 at 10:01 am

Let’s say 95% of the time about 10% of passengers simply will not show up or will have to change their tickets at the last minute. If airlines only sold the number of seats on the plane, then what to do about those 10% of empty seats due to last minute no-shows and changes? The airline could try to sell them at a super discount for last minute buyers or the plane could just take off with empty seats.

But suppose the airline sold a few extra seats. Since most of the time some there will be enough no-shows to avoid a problem, each flight generates more revenue. Even though it’s imperfect competition, some of that additional revenue will be passed onto passengers in the form of lower overall ticket prices.

It is also more economically efficient in terms of resources. Almost every plan will carry a full planeload from point a to point b. If every plane carried around 10% empty seats on every flight we would be wasting space and fuel.

12 Mark Thorson April 12, 2017 at 1:43 pm

Congress is now talking about making overbooking illegal. If something like this happens, the whole airline history will be paying for this one incident into the indefinite future. I like that idea.

13 msgkings April 12, 2017 at 11:56 am

One aspect I don’t see mentioned much is why United and other airlines don’t just keep raising their offer. I’m sure if they gave the guy $20K he’d have given up his seat, and they’d have saved millions, not to mention their rep.

The problem with that is word gets around that if you just stand firm the offers get crazy. Then everyone will demand $5000+ to give up their seat.

14 JWatts April 12, 2017 at 12:34 pm

United could have chartered a small jet to fly their 4 employees for $10K or so. So, at $2,500 cash it would have been a been close to a wash.

15 msgkings April 12, 2017 at 12:38 pm

Yep, agreed. Procedures are gonna change now. Heck they could have chartered a limo, Louisville is what a 4 hour drive from Chicago?

16 JOHN H HASKELL April 12, 2017 at 1:35 pm

On the one hand, you know enough to read MR, on the other hand you say extraordinarily lazy and stupid things like “everyone will demand $5000+ to give up their seat.” Looks like a failure of some sort

17 msgkings April 12, 2017 at 1:38 pm

At least I know how to use the caps lock key. Failure indeed.

18 y81 April 12, 2017 at 5:21 pm

Absent some effective coordination and enforcement mechanism, it is impossible for everyone to hold out and demand $5000. Some people will break ranks long before the bidding reaches that number.

19 Jeff Fisher April 12, 2017 at 6:52 pm

They don’t keep raising their offer because they don’t have to. They offer some meager compensation at the very last minute after individuals have already invested several hours in the trip they paid for. If they don’t get enough takers at that price they just impose it on a few customers. This has worked because people just meekly go along.

If that was required that the airline buy the seats back for whatever price they turn out to be able to buy them for then the airlines desire to fill every plane (as heavily encouraged by the economics of airplanes) would be balanced by their obligation to honor the tickets they sell. The current situation lacks that balance. The Airlines have strong encouragement from physics to 100% fill every plane, and are allowed to put much of the burden of losing that game onto a small minority of customers. Heck the airline didn’t even have to hire its own thugs to drag the guy off the plane.

Seems like a pretty obvious solution. The airline does a reverse auction until they get the seats they want, or they decide it isn’t worth it.

20 Allan April 13, 2017 at 12:18 pm

According to Google Maps, it is only a 4.5 hour drive from Chicago to Louisville. Certainly, the airline could have even rented a small bus (with room for sleeping) for less.

21 The Other Jim April 12, 2017 at 7:19 am

> it reminds us of how strong Tyler’s analysis can be

Are you high? He “analyzed” the situation by using multiple very, very bad analogies. Analogies are the tools of the lazy, and are actually an attempt to avoid analysis. To say nothing of bad ones.

He compared paying $500 to an airline only to get stuck in Gary, Indiana overnight to driving to Nordstrom to find they are out of blue pots.

Personally, I still can’t believe a grown man did this.

22 Steeg April 12, 2017 at 12:50 pm

Right? He had also already paid for the seat and taken it. It would be like getting stuck in Gary, Indiana, buying a blue pot, getting it home, and then getting told that you had to bring it back. I’m not saying the doctor was right, but those analogies were awful.

23 David Walker April 12, 2017 at 9:16 pm

Big fan of Tyler, but he suffered Catastrophic Multiple Analogy failure on this particular flight of fancy. Hopefully we’ll be able to figure out what happened after we recover the black box.

24 Thomas Sewell April 13, 2017 at 8:03 pm

+1. Came to the comments to make the same point.

The analogies don’t work because they are pre-contract vs. post-contract with significant other plans depending on the contract partner.

A more appropriate (although over the top in the other direction) comparison would be once a couple is married, if one of them wants to divorce, they may pay significantly, while before the wedding it costs much less.

25 subdee April 13, 2017 at 9:01 pm

Also came into thread to complain about the analogies… this is like buying a concert ticket, cancelling work for the day, spending extra money on transportation to the show, entering the venue, and then being told that because the venue is over-capacity, you’re going to have to leave.

26 JThomas April 12, 2017 at 3:06 am

Everyone, and I mean EVERYONE disagrees with you even United’s own CEO! But sure, “Doctor Dude” totally deserved having his head smashed in because he was legally right and just because “Law Enforcement Dude” says so.

27 Anon7 April 12, 2017 at 3:30 am

Who cares what “everyone” thinks? The CEO is simply capitulating to the mob.

28 prior_test2 April 12, 2017 at 4:02 am

Or worse, to the lawyers that will make it exceedingly clear that what United did was a distinct contractual violation.

29 Anon7 April 12, 2017 at 5:24 am

Unfortunately, the matter is not likely to be litigated because at this point what matters more is the PR, but it would have been interesting to see if their lawyers could have found a way to make it stick.

30 prior_test2 April 12, 2017 at 7:49 am

‘Unfortunately, the matter is not likely to be litigated because at this point what matters more is the PR’

Well, sure, but one can be fairly confident that United’s lawyers were talking about multi-million settlement costs, completely separate from the PR impact, with the settlement growing every time the CEO communicated to the public. In other words, offering the passenger something like a 5 million dollar check as promptly as practical (along with politely worded conditions in terms of keeping the settlement private) would likely have been their advice, quite apart from other considerations.

31 Jason Bayz April 12, 2017 at 9:43 am

There’s been a lot of “lawyers” in comment sections stating this violated some contract without citing any such contract.

I’m not holding my breath for it to happen in real life.

32 Anon7 April 12, 2017 at 4:31 pm

The mob is not particularly interested in legal niceties, which is why politicians grandstand against judicial nominees who are deemed to be insufficiently solicitous of the interests of the little guy in their cases against evil corporations.

33 GeorgeNYC April 13, 2017 at 6:43 pm

Here you go Jason. First off. Mr. Cowan is reading the wrong part of the contract. That section deals with “DENIED BOARDING COMPENSATION”. The Doctor was certainly not “denied boarding” he was already on the plane. Also, just for extra credit you will note that this was not an “oversold” plane so therefore actually none of this could possibly apply. Everyone there had a seat that they bought and were confirmed to be sitting in.

The part he should be looking at is called, “RULE 21 REFUSAL OF TRANSPORT”. There is a short list of items that can get you thrown off the plane. These include such things as:

Passengers whose conduct is disorderly, offensive, abusive, or violent;
Passengers who fail to comply with or interfere with the duties of the members of the flight crew, federal regulations, or security directives;
Passengers who assault any employee of UA, including the gate agents and flight crew, or any UA Passenger;
Passengers who, through and as a result of their conduct, cause a disturbance such that the captain or member of the cockpit crew must leave the cockpit in order to attend to the disturbance;
Passengers who are barefoot or not properly clothed;

et cetera…

There is no “catch all” whenever we feel like doing it (and they had the ability to set these terms).

So if he is sitting there he is not violating any of these terms. He has the right to be on that plane and in that seat. That is what he “bargained for” in the market that you all worship like a God. You libertarians reveal yourselves to be the complete corporate shills that you really are when you ignore contract terms to rationalize corporate violence. The immediate response here is “they can do whatever they want” they are the owners. If they are wrong they can just pay for it later as if everything has an economic value.

34 Thomas Sewell April 13, 2017 at 8:07 pm

Funny that as a Libertarian, I agree with prior_test and GeorgeNYC.

The airline contracted with this fella and as discussed they didn’t honor their agreement. I don’t see how a libertarian of any stripe would be on the airline’s side in that situation.

35 chris purnell April 12, 2017 at 12:36 pm

Since when did an employee rate higher than a customer? Isn’t his rent seeking gone mad?

36 Josie B April 13, 2017 at 9:22 am

Employees always rank higher than passengers at United.

Three years ago, United delayed my Newark-LA flight for three hours because the gate agents told us we were waiting for “a pilot.” Turned out our pilot was in the airport the whole time; the plane was delayed for a dead-heading pilot going back to Los Angeles.

In fact, United had a second flight leaving later. If the deadheading pilot had taken that jet, he would have arrived four minutes later than he actually did. And 200 people wouldn’t have wasted 600 hours cooling their heels in the passenger lounge in Newark.

I have many more United stories. The airline deserves everything it’s getting here.

37 Mike Schilling April 13, 2017 at 3:25 am

Where by “mob” we mean United’s potential customers. The hell with them; don’t they know he has a business to run?

38 "Doctor Dude" was wrong April 12, 2017 at 4:48 am

JThomas – No, not everyone! Think about what he did ! Why ? And for what ?

39 prior_test2 April 12, 2017 at 5:23 am

Well, apparently after not volunteering, he fell – ‘United’s brief response to the incident Sunday night — Flight 3411 was “overbooked” and police were called after a man “refused to leave the aircraft voluntarily” — disintegrated in a storm of derision.

Even the Merriam-Webster dictionary joined the fray when it noted a volunteer “does something without being forced to do it.” .

The chief executive’s first attempt at a public apology, Monday, did not fare any better. He apologized not for the man’s treatment, but “for having to re-accommodate these customers” — phrasing that created a meme-storm of mockery.

Chicago police were also criticized for an early statement, as reported by NBC, claiming the injured man “fell.” By Monday afternoon, the Chicago Department of Aviation — a different agency — said it had placed an officer in the video on leave pending an investigation.

“The incident on United flight 3411 was not in accordance with our standard operating procedure and the actions of the aviation security officer are obviously not condoned by the Department,” the agency said in a statement.’ https://www.washingtonpost.com/news/dr-gridlock/wp/2017/04/11/amid-pr-fiasco-over-dragged-passenger-united-ceo-defends-his-crew/?tid=pm_pop

Occasionally, instead of reflexively defending the divine rights of corporations, Prof. Cowen may actually want to be informed about what transpired.

40 Edm April 12, 2017 at 6:50 am

Pretty sure Tyler’s contract requires him to reflexively defend the divine rights of corporations.

41 Steve Schow April 12, 2017 at 4:54 pm

I’m no dictionary, but one could argue that voluntarily leaving the plane would mean agreeing to get off and walking down the aisle under your own power, even if you don’t “want” to. There was potentially threat of force, but I’m not sure it crossed the actual force threshhold yet. Involuntarily leaving the plane = exactly what happened, dragged out against your will.

42 Shieldfoss April 12, 2017 at 3:52 am

If Nordstrom starts to run out of their blue cooking pots on the day of the sale, so be it, they don’t raise the price toward the end of the day as supplies dwindle.

They could, though. It’s their pots. And if I didn’t like the price they charge to part with the pots they paid for earlier, I’m not allowed to use violence to take a pot by force.

43 prior_test2 April 12, 2017 at 4:11 am

‘They could, though. ‘

If they wish to break the law, as deceptive advertising involving publishing a sale price and then not honoring it is a crime (though mistakes can happen, and that is not deceptive advertising – http://smallbusiness.chron.com/company-advertising-price-wrong-responsible-mistake-73117.html )

This comment section is always such a delight to read, such as those commenters who seeemingly have no idea that they still live in a country where the rule of law is held higher than the divine right of merchants.

44 Ricardo April 12, 2017 at 9:13 am

There are those who believe that “law” should be mainly limited to contract enforcement, and that both merchants and customers are entitled to this divine right…

45 prior_test2 April 12, 2017 at 9:43 am

Deceptive advertising is not a part of contract law. Bait and switch is illegal, for example. As is a store advertising a price, then arbitrarily raising it because they can, as the commenter wrote.

46 Ricardo April 12, 2017 at 10:08 am

If Nordstrom’s says “we’ll sell blue pots for $50,” but then you get to Nordstrom’s and they say “sorry, due to high demand the price is now $100,” I don’t see where any contract is being violated.

47 Boonton April 12, 2017 at 10:31 am

Actually advertising is an aspect of contract law. Contract begins with an offer and then that offer is accepted or rejected by the other party. If it is accepted, the contract should be fulfilled or else you have a breach.

I offer to sell you my house for $100K, you accept immediately. I have second thoughts, I should have asked for $125K. I refuse to sell, you can sue and force me to sell.

JC Penny offers blue pots for $5, to accept show up at the store on Saturday. You show up, you’ve accepted their offer, if they suddenly try to say the pots cost $10, they’ve breached the contract.

48 Steve Schow April 12, 2017 at 4:57 pm

What if the price of the pot is not “advertised” in any outside publication or signage, merely on the shelf directly in front of the pots? Kohl’s has those electronic LCD price tags attached to everything. Could they update the price throughout the day as pots are purchased and not violate any laws?

49 Boonton April 13, 2017 at 8:36 am

Of course they could not advertise the price in outside media and have an LCD price tag on the shelf that changes as demand is perceived to outstrip supply (how often it changes seems an interesting question….suppose they change it every half hour, someone who puts it in his cart at 2:00 could discover when he finally gets to the register at 2:15 that the price suddenly increased.

50 asdfasdf April 13, 2017 at 1:18 am

Ah yes, who can forget the wall-to-wall “blue pot” advertisements that would make nordstroms liable. What a fabulously absurd assumption.

51 Hazel Meade April 12, 2017 at 10:58 am

By analogy, lets say someone takes the pot set that is in the display window and tries to check out with it. Can Nordstrom say “Sorry that set is for display purposes only, please put it back.”? And if the customer refuses and demands to be allowed to check out with it on the grounds that the sale is one day only and this is the last set, can they call store security and forcibly take the pots back?

52 Pshrnk April 12, 2017 at 11:25 am

You have paid for your pot, and as you are leaving the store, security stops you and says you must return the pot, because they need it for one of their sales associates to cook dinner tomorrow.

53 Hazel Meade April 12, 2017 at 11:41 am

Flight crew for another flight is not equivalent to “cooking dinner tomorrow”. I think the “display set” analogy is better. The display set is part of the store’s on-going pot-selling operation.

But overall the pot-selling analogy is poor. Airline travel has safety aspects that demand that crews be at the right time and place and that order be maintained on the airplane. An unruly passenger in flight is a danger to all of the other passengers, as a result there are some pretty strong norms against making a fuss. Nothing in the pot analogy really captures that.

54 Steven Kopits April 12, 2017 at 6:34 pm

This is not a display pot. It has been sold, and Pshrnk’s analogy is exactly correct.

It is not a prospective sales. A prospective sales is a stand-by seat. United can say, well, the plane is full, sorry you can’t go. That was a condition of the sale, just as Nordstrom is not obligated to sell a display item.

But for a confirmed passenger sitting on a plane? That is a consummated deal in which the property rights have been transferred to the passenger.

United should have an auction for the seats. And we know an auction will yield the lowest free market cost, because the passengers with the lowest propensity to fly will cave first.

55 byomtov April 12, 2017 at 3:27 pm

Why Nordstrom wants to promote the pot by having one in the window when they have none in stock is a bit mysterious. Looks like a way to annoy customers who see it and come in wanting to buy one.

Leaving that aside, Nordstrom very likely will give you a rain check to let you buy the pot at the sale price when it comes back into stock. But this is very unlikely to be an analogous situation to being given a flight the next day. How many customers consider it really important to get the pot today rather than next week?

A big part of what you buy when you buy an airline ticket is the timing of the trip, as well as the seat itself. A flight the next day is often not a fair substitute.

56 Rahul R April 13, 2017 at 1:44 pm

exactly opposite. They sold you the pot. Then asked to give it back because they want to keep it for display. You don’t want to give it back because you really like it and want to use it tonight. they forcefully take it back from you and hand you a voucher to buy another pot another time.

57 Thiago Ribeiro April 12, 2017 at 5:57 am

“but those who hate on United should ask themselves whether the people who spend their whole lifetimes trying to get people safely from one place to another, often places so far apart as to be astounding”

I have heard it is their business model. The whole situation is a revealing, sad picture of life in Trump’s America, where corporate Gestapo can steal what a man paid for and beat him up and it is still his fault.

58 Jay April 12, 2017 at 1:16 pm

To be fair it wasn’t United who beat him up, look at the uniforms in the video.

59 Thiago Ribeiro April 12, 2017 at 1:52 pm

Yes, but they called the Air Gestapo to get him.

60 Steve Schow April 12, 2017 at 5:00 pm

People have been involuntarily denied boarding for flights for decades. Two other people left this exact plane without incident. This is not a “Trump” thing. This is a “cameras and social media are everywhere now” thing.

61 k.m. April 13, 2017 at 2:14 am

If he was denied boarding a plane, how come he was sitting on his seat in the plane?

62 Steve Schow April 13, 2017 at 12:47 pm

Wrong choice of words on my part, you’re right. But…I have yet to see the actual legal language in the contract of carriage that says whether a passenger sitting in his assigned seat on the plane has more rights than he did when he was standing in line outside the plane. Some people assert that this is the case without any proof, and I’m hoping someone with more time than me will look into it.

63 GoneWithTheWind April 12, 2017 at 10:41 am

While I agree it looks bad what other choice do the police have? Their job at that point is to ask this man to leave and if he refuses a lawful order to remove him. Their job isn’t to explain the rules to him or argue with him for half an hour. As for the airlines I would agree that they need a better system so that they can avoid this in the future but they too were in a no win situation. As I understand it 4 people had to be removed to allow four flight crew to make it to their next assignment. What are the choices? That the airlines doesn’t make the effort to get pilots and crew at the airport in time for the plane to take off???

Perhaps someone will argue that this man didn’t understand but somehow I suspect that if he was on a plane in China or North Korea and the police told him to stand up and walk out he would understand that clear as crystal. So I think he was playing off of the sympathy he was getting from the other passengers.

And the other passengers shouldn’t be vocally supporting him or in any way making it all worse. The simple fact is that you are on THEIR plane and when they ask you to leave you must leave and if you do not the the police must remove you. Why whine and boo the police? Take the videos, talk to the cable news shows afterwards and speak out then but don’t make it worse by acting out in the plane.

64 Thiago Ribeiro April 12, 2017 at 11:09 am

” As I understand it 4 people had to be removed to allow four flight crew to make it to their next assignment. What are the choices? That the airlines doesn’t make the effort to get pilots and crew at the airport in time for the plane to take off???”

Doing a better job at their job? Planning better? Not selling seats they cn not actually provide? Have replacement workers so the world won’t stop when they plan badly? But I guess United is really better than North Korea. Beter than Satan, too, I guess. I hope they use that fact on their ads.

65 Pshrnk April 12, 2017 at 11:45 am

Thank you TR. The underasked question is: Why did United, after passengers were already boarded and seated, suddenly need to put 4 employees on the flight?

66 Daniel Weber April 12, 2017 at 12:10 pm

Because shit happens.

Airlines operate under extremely tight margins and in a non-deterministic world where sometimes passengers show up on time and sometimes they don’t. Do you want to pay 10 bucks more? You will say “yes” here in the comments, but the place where it actually matters, when you are browsing on Orbitz.com, shows you won’t.

67 Thiago Ribeiro April 12, 2017 at 12:32 pm

This is why I mislabel everything I sell and cheat people out of what I sell them: the stingy costumers will not pay $10 more – or is it $ 20 or $200? When people don’t comply, I send the Gespato beat them up for being so avaricious. There have been a few complaints but bearing will continue until the costumers feel better about my business model.

68 Andao April 12, 2017 at 4:01 pm

It could have been a weight issue too, but at this stage trying to rationalize it makes for bad PR.

Sometimes planes have to fly with 10+ seats empty if the other passengers bring too much luggage, and that can result in people being kicked off even after taking their seats.

United should have pushed the safety angle further. “Delaying our flight attendants could jeopardize safety on the connecting flight in Louisville.”

69 prognostication April 12, 2017 at 4:46 pm

@Daniel
I think it depends who “you” is. The aggregate “you” won’t, generally, but I absolutely will, and I wonder how idiosyncratic preferences aggregate in circumstances like this. I already loathed United and have routinely spent non-trivial amounts of money to fly on other carriers because of my repeated bad experiences with them. The only time I will fly carriers with whom I’ve had multiple miserable experiences are when the price gap starts climbing into the quarter-to-third of overall ticket price range or when I need to time my flights down to a window of 2-3 hours.

70 justsomeguy April 12, 2017 at 1:27 pm

Offering CASH incentives rather than “vouchers”. I suspect that UA employees are incentivized to offer as little as possible. For 1000- CASH, there would have been plenty of takers. But GREED was the highest priority both in directives to employees, and regulations by congress/FAA paid for by airline lobbyists. And having “law and order” politicians that support police forces that are militarized and favor corporations over actual citizens also doesn’t help.

71 GoneWithTheWind April 13, 2017 at 10:20 am

The airlines are limited by law to what they can offer a customer to give up their seat.

Most responses to this incident are emotional and not rational. The airline had a problem and the only solution at that time was some passengers had to be bumped. They were required by law to get their employees to the next airport so another flight could take off on time. They are required by law to have this flight take off on time. AND when a passenger refuses to obey the flight crew they are required by law to call in the police. No one addresses those simple facts.

The “right” thing to do that would have prevented the lawsuit and the embarrassing video was to simply argue with the passenger for a few hours until finally every other passenger had had enough of the antics and one of them would have dragged the man off the plane. But, that is why we have laws so that passengers don’t have to take the law in their own hands. Those are your choices. That plane could still be sitting on that runway waiting for this passenger to deplane if the airline had not called the police in. You simply cannot give one random passenger veto power over every airline flight. Either you are a country of laws or you are not.

72 Cathy April 13, 2017 at 1:56 pm

The only reason the airlines are limited by law to $1,350 is because they have lobbyists.

73 kronrod April 17, 2017 at 4:39 pm

@GoneWithTheWind: that’s complete BS. They are not limited at all. The 1350 USD are the minimum. They are free to go higher.

74 Daniel Weber April 12, 2017 at 12:08 pm

The other passengers figured a better offer would come along if they stuck together. Maybe free flights for everyone? Why not, a man can dream.

75 Aric April 12, 2017 at 7:46 pm

Do you really think that 100+ strangers could spontaneously create a functional cartel with fewer than four defectors?

76 Daniel Weber April 13, 2017 at 10:55 am

A man can dream.

77 JOHN H HASKELL April 12, 2017 at 1:38 pm

It was not a lawful order. It was an illegal order. That’s why you use the Chicago PD

78 adam April 13, 2017 at 9:47 am

The cops could (and should) have said: “We do crimes. We don’t see any crime here. We don’t adjudicate contract disputes. Deal with it yourself United.”

United had plenty of options. It could have offered more money to get someone to give up their seat. It could have found alternate means to transport its crew. This was, after all, at O’Hare, which is United’s main hub and home of its HQ. There’s almost certainly a number unused planes sitting there for their executives at all times. And, of course, they could have planned better by not selling seats they needed for their own crew.

79 Alex April 12, 2017 at 1:39 pm

I think each of these examples (the ATM, the pot at Nordstrom, the concert line) miss the point spectacularly. In each of those cases, people are denied the OPPORTUNITY to buy a product because supply runs out. In this case, people are forcibly denied a product that they’ve already bought because it was oversold. What you’re suggesting is analogous to a band booking 3 shows for the same time slot, with the expectation that two of them will cancel.

That leaves two options– either airlines stop overbooking flights or they bid up the amount offered to passengers to give up their seats until someone bites (which would require lifting the cap on involuntary boarding payouts). Each of those is likely to drive up prices for airline tickets, but I think the overwhelming majority of consumers would be willing to sacrifice higher prices for the certainty of being able to stay on the flight that they booked and paid for.

Now, maybe there are mechanisms to get around that– perhaps airlines can sell “overbook” seats that are subject to sufficient space being available on the flight. Those come with a lower price, and the understanding that they’re the first to be bumped, and may be bumped up to, say, two days from the initial booking. But in that case, people are voluntarily waiving certainty in exchange for a lower price point.

But I think it’s all but certain that the involuntary removal of passengers from flights that they paid for is spectacularly bad policy.

80 albatross April 12, 2017 at 3:27 pm

I think the emotional impact here is all about how it was done.

In some alternative universe where United had not let him board in the first place, because they were overbooked/needed four seats, I don’t think there would have been any incident. But once he’d gotten onto the plane with his wife and thought he was going home, it’s easy to imagine how having them say “nope, sorry, we’ve decided to kick you off because we’ve got more important people for your seat” went down pretty badly. I

Add to that: there’s a lot of randomness in travel. Flights get canceled or delayed, you get stranded in some airport you don’t want to be in, you have to run to make your connection and then squirm in your seat for 20 minutes because you never had a chance to hit the bathroom on the way to the plane. And so on.

I also think a big part of the emotional impact on other passengers watching this on Youtube has to do with the culture of security and policing that’s grown up in the last decade or two around air travel. When we travel, we all understand that there are a bunch of people in uniforms who are entitled (if not by the law, at least by the way power works out in practice) to hassle us, bark orders at us, screw up our trip, make unreasonable demands, etc. The rules are often pretty arbitrary and random-seeming, and they’re mostly interpreted by the people barking orders at you. Maybe they’ll decide to grope your wife or child. Maybe they’ll hassle you for the book you’re reading. Maybe they’ll toss you off the plane for reading something in Arabic.

None of those things are likely. Most air travel is pretty uneventful–I’ve traveled many hundreds of thousands of miles by air in my life without having anything worse than some jackass making me miss a flight for a dumb reason. But (as with the threat of terrorism), there’s this always-present knowledge that there are these people with a lot of arbitrary power who can screw up your trip, ruin your day, etc. And most people don’t actually like that, even though it’s hard to get together an effective political coalition to, say, get rid of the (mostly useless) TSA.

Now, some of that is probably necessary. The airline does need to be able to kick people off the plane. There are rules that need to be enforced for everyone’s safety or comfort, and at some point, the police are going to get called and someone’s going to get dragged off a plane.

But most of the arbitrary power is unnecessary–it’s a product of our culture and our (IMO broken) way of thinking about authority and power. My guess is that 95% or so of the arbitrary power/barking orders sort of interactions are unnecessary. The threat that you’ll get hassled by the TSA or DHS or FBI or someone if you get out of line is kind-of always there in the background, occasionally made explicit, and like 99.9% unnecessary.

81 Steven Kopits April 12, 2017 at 6:40 pm

That’s the point. The flight emphatically was not over-sold, because the passenger was already sitting in his seat. If it’s oversold, then the prospective passenger is not allowed to board.

There is nothing wrong with overbooking in order to maximize load. However, if you have to buy back confirmed seats, then of course you’ll have to pay the market rate at that time.

82 k.m. April 13, 2017 at 2:01 am

“Hello, I bought a blue pot from your webshop, I’ve now come to fetch it.”
“Siret me check … yes, here is your pot and receipt. Thank you for using the United Blue Pot services! Have a happy blue pot experience!”
[15 min later]
“Sir, unfortunately we have come to remove this blue pot from your possession.”
“What! Why? I paid for it.”
“No, you didn’t. If you bothered to read the fine print on the webshop contract, you paid for a lottery ticket of possible chance of obtaining a blue pot. The blue pot was never yours, and now we have deemed that one of our employees needs the blue pot more than you. We apologize for the inconvenience! And you will of course be paid.”
“I need a blue pot right now, instead of your money! I have already started cooking with it! The soup is boiling inside!”
“Sir, if you will not part with it and take our money, this police officer will brutalize you and take it. We also could do this the Ryan Pots way, and charge you 15 euros because police officers are not cheap.”

83 Marcello April 13, 2017 at 2:03 am

Best solution a backward auction starting from a serious amount of money that takes in consideration negative publicity.

Somethin like….Who would like 20.000$ to get off?…. probably many hands will raise…. who would get off for 19.000$?… etc … until you are left with a single volunteer.

84 Elio April 13, 2017 at 10:59 am

So If airlines are legally permitted to make false promises—and to overbook a flight is, essentially, to promise a service that cannot be fulfilled—they ought to pay market price to compensate people for the unfulfilled promise. Instead, airlines are permitted to practice a kind of bizarro capitalism, in which they can overbook with impunity and throw people off the plane after they reject an arbitrary fee. Companies in concentrated industries, like the airlines, have legal cover to break the most basic promise to consumers without legally breaking their contracts. The video is a scandal. But so is the law.

85 Jay April 13, 2017 at 1:05 pm

There was no overbooking in this case and what exactly is this “market price” you speak of?

86 Moo cow April 12, 2017 at 1:17 am

The ticket analogy. The venue has no control over who lines up to buy. The airline does have control. If the flight is “full” (no seats plus standard overbooking algorithm satisfied for that flight) you don’t get issued a ticket at Priceline.com. and you can’t wait in line.

87 Tyler April 12, 2017 at 1:37 am

Exactly. Did I miss the part where he acknowledged this major difference?

88 Ignacio April 12, 2017 at 8:06 am

I agree. The mistake in Tyler’s analysis is not that there was more demand than supply for seat; it is that the airline took the passenger’s money, assumed the obligation to fly them, and then decided to bump them to give the seat to its employees. The airline had a problem and made it the passenger’s problem. The airline should have purchased a ticket elsewhere to fly its employees (even charter a plane) or assume full responsibility for what they were going to do (i.e., understand that they will have to fully compensate the pasenger for the breach of contract).

Interesting point about the price regulation of maximum price to be paid for bumping passengers.

89 Pshrnk April 12, 2017 at 11:47 am

“Interesting point about the price regulation of maximum price to be paid for bumping passengers.”

Is that so low due to regulatory capture? Whatever….that’s messed up 🙁

90 Michael April 12, 2017 at 3:40 am

The problem with the event ticket or blue pot analogies is I don’t believe that event tickets/pots are oversold as a matter of practice with the idea that some certain percentage of buyers will be no shows.

This practice by the airlines, while economically beneficial (in probability both to airlines and passengers as a whole) does shade the perceived moral obligation. While 99.6% of the time this practice works out, the 0.4% of the time creates unexpected externality costs for passengers who although in a purely legal sense may have bought a high probability ‘lottery’ ticket to fly in practical sense believe they’ve bought some degree of travel guarantee and have typically made additional financial/personal commitments based on that understanding.

As a frequent traveller who has almost been bumped a number of times (including opting for volunteer delays on a number of circumstances when able) I’ve taken to buying additional ‘insurance’ to reduce risk – typically in the form of pre-assigned seats (significantly decreases risk of bumps compared to non-assigned fares. I’ve never before seen a situation like this one, however, where an already seated passenger was asked to disembark – this represents a fundamental process failing by United, and you could see further moral shading on behalf of the client (the old possession being 9/10ths of the law – of the seat as a perspective). I have had airlines try to split up my family during travel including my wife and infant child, which again was incredibly unfortunate.

The things that seems to make this consistently worse in my experience is these bumps often occur on international destinations with no remaining flights in the day – which can cause havoc for personal travel plans, vacations, etc. One could argue that the externality costs of vacations are lower compared to say, business travel, but given most people have limited vacation time and fixed vacation agendas the externality feels higher.

I think the fact that Hawaiian airlines has the lowest bump rate in the industry goes to support that supposition around perceived externalities – most people traveling to Hawaii on vacation have fairly fixed plans and high accommodation expenses, no shows are likely lower, and I suspect takes this into account and has made a brand choice tradeoff on keeping a lower oversold percentage.

Every day, the airlines who overbook make a calculated gamble that based on no-show percentages, volunteer buyouts, typically low coverage of negative effects will work out in their favour. It didn’t here for United in the short run and perhaps in the long run, which implies they’ve miscalculated and their policies/calculations need to be adjusted.

Which is all good economic theory, but in the end this was a human situation that was dealt with very, very poorly by all involved.

91 Blaise April 12, 2017 at 6:10 am

This is also what I thought when reading it. The analysis is quite complex but fundamentally flawed.

92 Andao April 12, 2017 at 4:03 pm

You can’t assess how much the plane will weigh until everyone and everything is on board. So passengers bringing excessive luggage will lead to someone getting kicked off, even when everyone is a paying customer.

93 Steve Schow April 13, 2017 at 12:52 pm

Most (all?) modern jets – even regional Embraer’s and CRJ-700’s – have sufficient thrust to account for heavier humans and bags on board. Weighing of passengers and luggage only takes place on prop planes where the margin for error is lower.

94 "Doctor Dude" was wrong April 12, 2017 at 1:19 am

Sorry about the typos.

95 "Doctor Dude" was wrong April 12, 2017 at 1:29 am

and sorry about “I am not sure. though.” Rereading your comment, Tyler, I agree with you – the angry customer made life worse for United customers in the future, and he does not care. He is not likely to ever care, sadly. He is now a celebrity locked into his victim status. He should apologize, of course, immediately, to the United employees, the United stockholders, and future United customers. He will not, probably,, but God loves him anyway – almost none of us apologize when others support us in our anger., and God understands that. Still – Sad!

96 Thiago Ribeiro April 12, 2017 at 6:59 am

“the United stockholders”
Because they coukdn’t beat him up themselves?
“and future United customers.”
Why? He showed them what United’s Gestapo intends to do to them.

97 John Haskell April 12, 2017 at 1:40 pm

Did you resist an illegal order? Well you should be beaten and forced to apologize. And welcome to Trump’s America… we’re making America Great Again

98 compulsory voluntarism April 12, 2017 at 2:15 pm

“The beatings will continue until morale improves”

Suppose you have a right to something, protected by legally binding contract as well as by legal statute as well as by cultural norms and expectations. Then suppose that your right (which you paid for, mind you, we’re not talking entitlement, but a purchase) is taken from you in violation of the law. Then suppose that you are physically assaulted causing significant injury.

That’s what happened. The man is not “locked into his victim status”. He is authentically a victim. His legal rights were violated and his body was harmed.

Do you not know what tyranny looks like when it happens? You’re a dangerous fool.

99 byomtov April 12, 2017 at 6:02 pm

the angry customer made life worse for United customers in the future

No.

100 "Doctor Dude" was wrong April 12, 2017 at 10:27 pm

Yes he did, byomtov, I humbly think. The victim may be a good man at this point in his life, but like so many older men he gave in to the temptation to stubborn get off my lawn self-centered anger. Forget the legal details which nobody who comments here really understands – my theory is that because this man (a doctor and an artist who one hopes has done much good in his life) gave in to the temptation to anger, and won his little angry media battle, at great cost to himself and those who love him (no, the cash will not repay the suffering. He is an old man with money already and millions will not mean all that much to him – take my word for it or not). Anyway, going forward, those customers who do not display anger will be disadvantaged vis-a-vis those who display anger. That is not the legacy any decent person wants to leave. Tyranny is everywhere and always among humans: it grows and wanes with the acceptance (or rejection) of sinful and selfish behavior, such as the anger this man showed. My comment was not about United, a company like most: rather, I was reflecting on the age old wisdom that a wise man does not let himself be ruled by anger. And, by the way, compulsory voluntarism, I admire your thirst for justice. But let me ask: Where have you been for the last 30 years while I have been campaigning against the state’s right to physically assault people because they smoke a cigarette that includes a simple plant (not that I would recommend marijuana to anybody… particularly those with schizophrenia in the gene pool – but putting people into the physical peril involved with arrest and incarceration, because they are smoking the weed of a plant you disapprove of – is that not tyranny – do you recognize that?.) Where have you been while I have been campaigning against the violent abortions of fetuses who can feel pain (and those who can’t – but in either case it is tyranny – do you recognize that). If you have been on my side on these anti-tyranny causes, or if you think in your heart that you someday will be, I say, thank you, my friend. Thanks for reading.

101 Steve Schow April 13, 2017 at 12:56 pm

Agreed. United has already operated thousands of flights since this incident took place and nothing else newsworthy has happened. This will be buried in the trash heap of the 24 hr news cycle in a week.

My United flight to California last night was oversold. 1 person on volunteer list. Plane left without incident.

102 "Doctor Dude" was wrong April 14, 2017 at 2:12 am

Steve Schow: Hundreds of Don Colacho quotes would work here – how about this one, which tracks your comment closely – “History engulfs, without resolving, the questions it raises.” If just one out of ten posting here pray for the victims in this incident, much good may follow!

103 Rohan Verghese April 12, 2017 at 1:21 am

Is it just me, or does this entire analysis skip past the point that the customer already paid for and reserved a seat?

“If Nordstrom starts to run out of their blue cooking pots on the day of the sale, so be it, they don’t raise the price toward the end of the day as supplies dwindle. Paying $5 to each denied pot-buyer just ensures they are more likely to run out of pots the next time around.”

First, Nordstorm doesn’t take your money ahead of time and then not give you a pot. Second, most stores will give rain checks for items on sale that unexpectedly sell out and they can restock.

“To consider possible analogies, let’s say it was a queue to buy concert tickets, with more people in line than seats for the show. One option is to give cash to those who can’t get tickets, rather than just turning them away, but I’ve never heard anyone argue this would be efficient.”

Well, that’s because concerts generally don’t sell more tickets than there are seats, followed by turning away late-comers who have a valid ticket.

The crux of the problem is that customers think they are buying a seat on the plane, and the airline thinks it is selling them the chance of getting a seat on the plane. The unusual element is not compensating the bumped customer, but overbooking in the first place. Are there any other industries which overbook like the airlines do? Pretty much every other industry I can think of settles for selling only 100% of the available seats.

104 Nebfocus April 12, 2017 at 1:29 am

My thoughts exactly, nice response.

105 Daniel Cañueto April 12, 2017 at 1:58 am

The problem is that people want to the cheapest prices, without thinking too much about what is required to achieve them. Out of sight, out of mind. Then there is suddenly a shock when you are the one who is affected or when you see a video with the mishandling of a concrete case.

After all this shock, nothing serious will be done because any airline that do not incur on this practice would raise their prices and lose a lot of customers. They will only learn how to optimize the response to these concrete cases.

Nonetheless, I do not agree with Tyler’s analogy of queueing in concert venues. Queueing is not compensated in this case: it is too risky a strategy to get easy money. You can’t resell the ticket around the airport. If you can’t resell it, with concert tickets at least you can enjoy the concert. In contrast, it doesn’t seem pleasant the idea of going to a city you are not interested of and having to buy quickly a return ticket if you don’t want to look for a room there.

106 Nicholas Marsh April 12, 2017 at 1:59 am

Well indeed. If someone has paid for the ticket and then checked in then its not unreasonable for them to assume that they’ll actually get a seat.

The only other industry I can think of that overbooks is restaurants, also because people who reserve tables don’t show up. But they usually have a lot more flexibility than an airline – either the customer has to wait a bit until a table is free, or the proprietor can rearrange the tables and squeeze in some extra customers. Also, the customer can probably find a meal elsewhere.

107 Roy LC April 12, 2017 at 3:18 am

Restaurants generally don’t take the customer’s money until after the service is provided.

108 Tyler April 12, 2017 at 1:53 am

And it’s presented as a necessity to ensure a full flight. But really they only overbook in the first place because they expect a certain number of passengers will cancel, reschedule, or no-show. But it’s a pretty simple matter to charge steep fees for late cancellations, up to the full price of the ticket depending on how late you cancel/change. The airline benefits greatly from this arrangement, you don’t have this overbooking nonsense (which comes with its own costs to the airline), and most everybody thinks it’s fair. It would absolutely suck to pay a full ticket price if you cancel last second because of a funeral or something, but I always thought that’s what standby flyers are for. Plus businesses are usually willing to pay extra for more flexibility in rescheduling for business travel, so that’s a pretty typical way of dealing with more fundamentally unpredictable travelers.

109 Steven Kopits April 12, 2017 at 6:48 pm

This analysis is incorrect, Tyler.

Flight insurance is already sold with pretty much any airline ticket you buy. I flew on United yesterday and I purchased ticket insurance which covers me in the event I change my plans. In addition, many passengers will often come from connecting flights, and these may miss the connection for any number of reasons.

Overbooking makes perfect economic sense because it insures high load factors and underpins industry economics. Nothing wrong with that. However, once you have transferred the property right to fly to a passenger, if you want it back, you have to bid for it. The average aircraft will have maybe 130 passengers. Getting four of them to leave is not that tough. Indeed, United offered me $200 to take a later flight yesterday. Had it been in cash and not vouchers, I would have accepted, as it didn’t make much difference if I arrived home an hour later or so. You’ll always have a good number of people on a flight with arrival flexibility. It’s just a matter of getting the bid price right high enough. Having said that, statistically speaking, on some small number of flights, you’ll draw an statistically unrepresentative sample, and you’ll have to pay through the nose to buy back your seats.

110 Jmacks April 12, 2017 at 2:19 am

I agree. United sold this customer a seat, just as Nordstrom’s sold a customer a pot. I paid money, I expect a seat/pot. Anything else is misrepresentation of what I’ve actually purchased. Alternatively, United should have stated upfront that what they are selling are, in fact, vouchers that entitle passengers to partake in a lottery that for seats, with a chance that they might fail to do so. If that was stated upfront, I believe behaviors would change and either customers would choose to pay a higher fare for guaranteed seats or come earlier to check-in so they have a higher chance of not being kicked out.

I feel that it’s also unfair to blame this man, who believed he purchased a seat but was actually buying a lottery ticket, for higher prices for the rest of us. To be even more transparent, the airlines could charge higher for those who want guaranteed seats and charge even lower for those who are willing to roll the dice.

111 Ricardo April 12, 2017 at 2:43 am

“United sold this customer a seat, just as Nordstrom’s sold a customer a pot. I paid money, I expect a seat/pot. Anything else is misrepresentation of what I’ve actually purchased. Alternatively, United should have stated upfront that what they are selling are, in fact, vouchers that entitle passengers to partake in a lottery that for seats”

Every time you buy a ticket, one of those checkboxes you click asks you to read and agree to the airline’s contract of carriage. United’s contract includes provisions such as Rule 21 (providing the airline with the right to remove a passenger in certain circumstances), Rule 24 (limiting the airline’s liability for delaying or cancelling your journey or putting you on a substitute flight that arrives later), and Rule 25 (covering overbooked flights).

Now, I know most people never read this stuff and there is broader debate we could have about how to summarize long contracts and terms of service and make sure customers’ attention is drawn to some of the more contentious or disadvantageous provisions. But it is also the case that any adult who is aware of how the world works generally knows it is not unheard of for airlines to bump passengers. It isn’t a rude shock or an obscure loophole in the contract of carriage.

112 Michael April 12, 2017 at 3:48 am

I’ve probably taken over a thousand flights in my life, on carriers all over the world. I’ve never before seen someone taken off a plane once seated – that is something to reasonably consider a ‘shock’ and unexpected behaviour.

This lottery system has become more prevalent in recent years – and it’s affected my personal behavior in ticket purchasing to increase odds (typical approach being to buy pre-assigned seats). For less frequent travellers it would still be a shock to experience this (after all, the odds of this vs. getting 00 on roulette are almost equivalent and surprising).

113 Ricardo April 12, 2017 at 4:42 am

“I’ve probably taken over a thousand flights in my life, on carriers all over the world. I’ve never before seen someone taken off a plane once seated – that is something to reasonably consider a ‘shock’ and unexpected behaviour.”

This exact situation is rare but I have been in situations where I have been bumped and also had the experience where a flight was cancelled after we were boarded and we were all asked to get off the plane and wait in the airport for alternative arrangements. As a passenger, you know there is no guarantee that you will arrive on time at your destination in the exact plane specified on your ticket — stuff happens and there are rules and contractual provisions that spell out the limits of the airline’s liability.

I don’t know enough about aviation law to know whether it is a violation of the contract of carriage or federal regulations to remove a passenger who has already been seated to make room for emergency crew members (which, again, was the actual situation here, not overbooking). But it is hardly something that is outrageous or unconscionable since that same passenger could have simply been denied boarding at the gate or during check-in or the entire flight could have been cancelled and all passengers could have been ordered off. As I said, United could have handled the situation better and there are probably things that could be done in the long-run to minimize the need to bump passengers to make way for emergency crew members.

114 John Haskell April 12, 2017 at 1:41 pm

It’s a “shock” and unexpected because it is illegal

115 Mark Thorson April 12, 2017 at 2:05 pm

If the Chinese guy somehow turns this into a lucrative franchise with interviews on TV shows and maybe some YouTube/Twitter traffic with advertising, this kind of event will become much more common. I already see the video which someone took with a smartphone is marked with some URL or hashtag. C’mon, beat me up, make it look good, the whole Internet is watching.

116 BladeDoc April 12, 2017 at 6:27 am

As Nicole Gelinas points out in https://www.city-journal.org/html/may-i-drag-you-your-seat-15114.html — the United “contract” that you agree to is over 37 thousand words long and (having just plugged the section on cancellations and denied boarding into a reading level calculator) is Fleisch-Kinkade level 22 meaning to understand it you would need to be in graduate school (which admittedly includes the physician in question). The average reading level in the US is grade 8 BTW.

So basically you sign a “contract” that is the physical purchase equivalent of “click-wrap”; you have no opportunity to change or negotiate it and the vast majority of people in the country can’t even understand it if they tried. Legal or not, I suspect this type of thing is perceived as morally non-binding and when the legalities fly in the face of perceived fairness the company is going to fare poorly if they try to hide behind the practice in the court of public opinion.

117 Ricardo April 12, 2017 at 7:47 am

A fair point, and, as I mentioned, there is a worthwhile broader debate about “click-wrap” and its equivalents. Some other points to consider, though, are that this is why we have regulation and also lots of public, more easily readable information online and in the popular media about what your rights as a consumer are. My only point is that most people have been given fair warning that delays, cancellations and “bumping” all happen sometimes (and maybe regulators should tell airlines to add a pop-up box saying this when purchasing a ticket online). Regulations that are frequently discussed in some of the sources I mentioned and most people’s frequent flyer friends and relatives could give roughly accurate information about what the customer’s rights are in those situations. If you will incur serious financial loss if you don’t arrive at your destination on time, there are several sources that will advise you to buy travel insurance and/or schedule your arrival to be 24 hours before when you need to be at your destination. For instance, the Department of Transportation has this dry but readable summary of the rules here: https://www.transportation.gov/airconsumer/fly-rights

118 John Haskell April 12, 2017 at 1:42 pm

Nice point, not relevant. United issued an illegal order, the man resisted and was beaten

119 rule 21 April 12, 2017 at 8:47 am

Have you read Rule 21? I admit that I haven’t. But other commenters say that it doesn’t apply in this circumstance.

120 Daniel Weber April 12, 2017 at 12:19 pm

Those other commenters aren’t lawyers, either.

121 Steven Kopits April 12, 2017 at 6:55 pm

It is not ‘I expect a pot’. I am walking out of the store with a pot I have already purchased.

A voucher is called a stand-by ticket. A confirmed ticket is one which has been confirmed. If United wants to put in big letters, “This Ticket does not Insure your Ability to Fly”, well, go ahead, knock yourself out. People will buy tickets on airlines where a ticket means they can actually board and fly.

122 k.m. April 13, 2017 at 2:27 am

>Now, I know most people never read this stuff and there is broader debate we could have about how to summarize long contracts and terms of service and make sure customers’ attention is drawn to some of the more contentious or disadvantageous provisions.

I think this is an example where idea of “free contract rights” breaks down when implemented in practice. Most people would assume a shopkeeper would be insane if they would expect customers to read and sign thousands of words long contacts when buying blue pots. Actually they would not even expect people to read the contract: the text would be hidden under the desk, where the people could fetch it for reading in theory, but practice the sales clerk would give you just a small lip with the text “I’ve read the contract” and you were expected to sign it.

123 k.m. April 13, 2017 at 2:27 am

*a small slip

124 coketown April 12, 2017 at 2:31 am

In fairness, the customer also agreed to United’s conditions of carriage which, as Tyler points out, addresses this issue specifically.

In my experience it’s not uncommon for retailers to take money for items they don’t have in stock, and have to offer a rain-check or refund when too many people go to pick up the item. It happens. I don’t think airlines are unique in that practice. And given the complexities of union contracts and government regulations that airlines must contend with, I don’t think comparing them with cooking pots at Nordstrom is terribly apt. Jesus Christ I just looked at Nordstrom’s blue cooking pots, and anyone spending $481.00 on a 7.25 qt. cooking pot should be bloodied to a pulp and dragged away from polite society like that doctor. For crying out loud.

As the Gary Leff pointed out, United did not overbook. They were at capacity and then had contractual obligations that required them to bump a passenger to accommodate another crew. If that’s ‘overbooking’ then the only way to not overbook would be to leave four seats empty on every flight, which doesn’t seem terribly efficient. Leff says that about 40,000 US passengers are bumped each year, while the DoT says for 2015 there were 895 million US-based airline passengers. In that context, 40,000 is minuscule, and this doesn’t seem like an system in need of reform, considering prior to the irate doctor, 40,000 people a year dealt with this issue amicably enough to not warrant international media attention.

125 anonymous reply to coketown April 12, 2017 at 2:43 am

It is nice to see that somebody cares about making a correct observation. I don’t know why, but even after all these years of living in our current dystopia, my heart is still hopeful and gladdened to see that the pursuit of truth is not completely abandoned. By the way, I hope ‘coketown’ has something to do with steel. “coke” the drink would be great if people only drank it in summer, or only at the beach or only at the drug store or only at the county fair while walking over the straw-strewn paths in between exhibits. But people seem to want to drink it every day, and that is just not healthy.

126 coketown April 12, 2017 at 6:39 pm

No, it’s coke as in cocaine. I spend all my free time in coketown with my friends Molly and Tina, if you get my meaning.

No, not really–it’s the fictional setting of “Hard Times” and does have to do with steel production. I just loved the sound of the word when I came across it and figured few other people would be using it for a handle on the internet.

127 anonymous reply to coketown April 12, 2017 at 10:14 pm

I read Hard Times like just 4 years ago (I loved the circus scenes and Stephen’s girlfriend and wife are 2 of my favorite fictional characters) and I forgot all about Coketown! Great name.

128 prior_test2 April 12, 2017 at 4:14 am

‘nd then had contractual obligations that required them to bump a passenger to accommodate another crew’

They had no ‘contractual obligation’ to throw a passenger off the flight.

129 lemmy caution April 12, 2017 at 1:38 pm

Here are united rules for a “denied boarding”:

https://www.united.com/web/en-US/content/contract-of-carriage.aspx#sec25

“A.Denied Boarding (U.S.A./Canadian Flight Origin) – When there is an Oversold UA flight that originates in the U.S.A. or Canada, the following provisions apply: ”

Here are the united rules to kick you off the plane:

https://www.united.com/web/en-US/content/contract-of-carriage.aspx#sec21

“UA shall have the right to refuse to transport or shall have the right to remove from the aircraft at any point, any Passenger for the following reasons:”

In this situation they could have denied him boarding but they didn’t
they instead let him board the plane and improperly kicked him off

130 The Lunatic April 12, 2017 at 4:22 pm

Yes, the Contract of Carriage does address it specifically. It specifically says in Rule 25 that it can deny boarding in the case of oversold flights, which is not remotely the same as removing already-boarded passengers in order to allow a crew to deadhead. All the reasons it can remove a passenger from an aircraft are in Rule 21, which doesn’t, at any point, include making space for other passengers, paying or not.

As this is a contract of adhesion, all ambiguities, legally, are interpreted against the drafter of the contract, which is to say, against United. United lost its contractual right to bump the doctor after they let him board. If they wanted to free up seats for their deadheading crew after the boarding, they had to find either cause under Rule 21 or secure a voluntary exit. They did neither.

131 Steven Kopits April 12, 2017 at 6:57 pm

+1

132 subdee April 13, 2017 at 9:20 pm

+1

133 Larry Siegel April 12, 2017 at 4:33 am

The airline is selling their best efforts, which usually consists of a seat on the flight that the passenger reserved one on. However, as a very frequent flyer, I know that is contingent on (1) the weather, (2) mechanical issues, (3) downstream issues arising from weather or mechanical difficulties, (4) labor disputes, (5) terrorism, (6) pilot gets stuck in traffic or gets sick at the last minute, (7) all other causes, and (8) overbooking. I have been removed from a plane for business reasons and I have been the cause of someone else being removed.

Because bad weather causes a great many flight cancellations and delays, it is never possible to buy an absolute guarantee of passage. The best bet if you really need to get somewhere is to book the flight for earlier than you need because, sooner or later, you *will* not get on the flight you are originally booked on, usually for weather reasons.

134 Thiago Ribeiro April 12, 2017 at 7:22 am

“The airline is selling their best efforts, which usually consists of a seat on the flight that the passenger reserved one on.”

No, they are not, they are selling seats they simply do not have – to make money.

135 The Other Jim April 12, 2017 at 8:05 am

Jesus, Larry.

You know, Thiago makes his best effort to get to work every day, but sometimes he just doesn’t get there. Because he lives in the hellhole that is Brazil, sometimes the bridges collapse or he is beset by armed rampaging gangs of orphaned pre-teenagers. Brazilian employers understand these hazards well.

Other days, due to his abysmal planning skills, Thiago simply got far too hammered the night before and can’t get out of bed.

In Larry’s world, these are the same problem.

136 Thiago Ribeiro April 12, 2017 at 8:18 am

“Because he lives in the hellhole that is Brazil, sometimes the bridges collapse or he is beset by armed rampaging gangs of orphaned pre-teenagers”.
No, they don’t and I am not. And I can not imagine Brazilian costumers being beaten up by the Air Gestapo.

“Other days, due to his abysmal planning skills, Thiago simply got far too hammered the night before and can’t get out of bed.”
No, it never happens to me. I plan ahead and so should airlines.

137 Thiago Ribeiro April 12, 2017 at 8:20 am

* customers

138 Willitts April 12, 2017 at 8:19 am

It’s just you.

Just because the airline doesn’t flash warning signs on your computer screen before, during and after you book doesn’t mean you don’t have constructive knowledge that airlines deliberately overbook.

How do I know passengers know this? Because we are all familiar with the terms “bump” and “standby.”

It’s no surprise that airlines want to fly with every seat occupied by a paying customer. What is slightly less obvious is that the more vacant seats an airline has, the more it has to charge and the more likely it will cancel flights or even entire routes. These routes typically get picked up by airlines with much smaller planes. Alternatively, fewer flights will be nonstop so that an airline will at least have a full flight for one leg and possibly both.

This “I paid for the seat, I own the seat” nonsense has got to stop.

139 derek April 12, 2017 at 8:56 am

Heh. In United’s case, it may very well happen. As in cease to exist.

140 msgkings April 12, 2017 at 11:51 am

LOL no. In case you haven’t noticed Wells Fargo, BP, and many other worse offenders still exist.

141 byomtov April 12, 2017 at 10:23 am

Exactly.

Tyler’s analogies just don’t fit.

He is stretching badly to somehow shoehorn this whole incident into his ideological framework.

And then there is this:

United didn’t do it because Department of Transportation regulations set maximum required compensation for involuntary denied boarding (in this case 4 times the passenger’s fare paid up to a maximum of $1350). So they’re not going to offer more than that for voluntary denied boardings, especially since the violent outcome here wasn’t expected and the United Express gate agent had no authority to do more.

Yeah. It’s all DOT’s fault. If we just didn’t have a government this wouldn’t have happened. Nonsense. The key phrase here is “maximum required.” That’s not the same thing as “maximum allowed.” And if the gate agent lacked authority to go higher that’s not DOT’s fault. It’s United’s. They, no one else, set the “price control.”

It’s ridiculous to talk about the evils of “price control” when all it is is the buyer refusing to make a higher offer. If you want to buy a house, or pay a passenger to give up his seat, and no one will accept your offer that’s not a story about “price control.” It’s a story about being unwilling to meet the asked price.

142 Seth April 12, 2017 at 10:31 am

“Is it just me, or does this entire analysis skip past the point that the customer already paid for and reserved a seat?”

No. He quoted United’s ticketing policy, which explains a customer’s priority in line. Yes, they’ve already paid for a ticket, but the ticket has strings that was agreed upon — whether you know it or not — when you paid.

But, I also didn’t find the analogies convincing or helpful because nobody paid for a spot in those lines. While the airline ticket fare may not guarantee a spot on a particular flight, it does guarantee that the airline will get you from point A to B at some time, so you are paying for more than just a spot in line. You are pre-paying for the completion of the service, which isn’t the case at a retailer, concert or restaurant.

While the airline ticket does have strings attached, most would think our risk for being forcibly bumped is extremely low. If it did happen to us without receiving enough compensation to make us feel okay about, we also would be extremely dissatisfied.

In most cases, airlines are able to get the volunteers they need with the incentives they offer. In this particular case the market didn’t clear because United decided not to pay the market price. It was within their ticketing rights to do so but it came at a heavy PR cost.

I think this is more similar to eminent domain, where government power is used to get property below the market clearing price. It may be within their power to do so, but leaves a bad aftertaste.

143 The Lunatic April 12, 2017 at 4:24 pm

Being bumped before boarding is allowed by the Contract of carriage. Being bumped after boarding is not. United was in violation of the contract it itself had drafted.

144 jon April 12, 2017 at 12:05 pm

“Are there any other industries which overbook like the airlines do? Pretty much every other industry I can think of settles for selling only 100% of the available seats.”

Commercial Banks ‘overbook’ their reserves.

145 Daniel Weber April 12, 2017 at 12:26 pm

Your water, power, phone, and broadband company depend on not all customers using full demand at once. Gyms couldn’t function if they needed a squat rack for everyone who might ever show up to squat. Cities with public transportation that sell monthly passes couldn’t handle everyone using them at once.

There are ways to get guaranteed service in those cases, like with SLAs or even resources dedicated just to you, but it is a lot more expensive.

It turns out that a 99% chance of service at 10% of the price is a good deal that most everyone accepts.

146 NatashaRostova April 12, 2017 at 12:22 pm

>Is it just me, or does this entire analysis skip past the point that the customer already paid for and reserved a seat?

I thought the same thing, it’s strange seeing Tyler make such weird forced comparisons, while overlooking this crucial distinction. Whats up with that?

147 Steve Schow April 13, 2017 at 12:59 pm

“The crux of the problem is that customers think they are buying a seat on the plane, and the airline thinks it is selling them the chance of getting a seat on the plane.”

What would be interesting to know in this case is if the passenger had received a seat assignment ahead of time. A lot of times if you are one of the last 2-3 people to check in or buy a ticket, your boarding pass says “See Agent” or something under the seat assignment. This should be the first clue that you are one of the first to go.

I would honestly be surprised if this guy purchased his ticket 2+ weeks in advance and was given a seat number in his original itinerary.

148 Roy LC April 12, 2017 at 1:22 am

What about the corruption in travel journalism? Leff like practically every “travel expert” reflexively took United’s side on this only moderating their position when facing backlash.

I don’t know about Leff, but from my personal experience and from several friends with family working for airlines, that almost all travel journalists are very slow to blame providers because they are so completely compromised by their enjoyment of perks. Regular upgrades by themselves are enough to buy most of them, and that is not counting special promotional events, junkets, etc… There is considerable awareness of this issue re. the cruise industry but it is at least as bad in the airline one.

Southwest Airlines seating free for all, ie lack of assigned seats, and lack of first/business class is much complained about in the travel press, but in my informal talks with Southwest’s regular flyers, especially those who fly the most it is very popular since those flying on short notice can still have a chance of not getting a middle seat.

149 Gary Leff April 12, 2017 at 1:35 pm

For avoidance of doubt the only perks I receive in my travel are those which come as a consequence of frequent flyer elite status (the amount I fly), and United isn’t my primary airline. United has also never compensated me — except as a disserviced customer.

Before lauding Southwest, take a look at the most recent DOT denied boarding statistics (Q4 2016):
https://www.rita.dot.gov/bts/sites/rita.dot.gov.bts/files/subject_areas/airline_information/passengers_denied_confirmed_space_report/2016/html/2016_4q.html

# of involuntary denied boardings qualified for denied boarding compensation and given alternate transportation:
Southwest Airlines 1,511
American Airlines 111
Delta Air Lines 15
United Air Lines 22

150 Roy LC April 12, 2017 at 6:17 pm

Thanks, I really appreciate your answer. You cover a different market than I generally use, but I will keep your blog in mind. Should you read this later though, your Southwest comment illustrates certain blindspots in your analysis.

Their bump rate according to your link is not exactly what it looks like, and not just because they have 135% more boardings than their nearest competitor, United.

Though I was only mentioning travel writers dislike of seating practices, I was hardly defending SWA relatively awful bump rate, which has been getting noticably worse, esp as they expand destinations faster than aircraft numbers.

However, I notice from your link that they are the only one that has more compensated passengers who also receive alternate transportation as required by § 250.5 than it has those not receiving the regulation required alternate travel. This accords with my experience that being bumped on SWA is a lot less terrible than being bumped on other airlines as I usually arrive that day or in the morning of the next vs the sort of cascading bump I have received from other airlines.

In addition since SWA makes last minute changes far cheaper and more easily than almost any other airline, thus increasing both their noshows and generating less revenue from them. They are also far more liberal at check in regarding letting people reach the gate where compensation occurs. Multiple times on United/Continental and Delta I have been prevented from entering the terminal due to arriving less than an hour, but more than 30 minutes before a flight without any compensation above some later flught, this has never happened to me on Southwest.

In addition SWA’s voucher system is also significantly better, since vouchers are actually credits and can easily be made transferable, and have no limitations in when and for what they can be used for.

Those top line numbers are not exactly what they look like at first glance. I didn’t mean for this to become a testimonial for Southwest but what can I do, they have more legroom than coach too.

151 Steve Schow April 13, 2017 at 1:03 pm

“but in my informal talks with Southwest’s regular flyers, especially those who fly the most it is very popular since those flying on short notice can still have a chance of not getting a middle seat.”

Southwest still has price discrimination ($15 to secure priority check-in number) and they end up discriminating against the technologically challenged, if you don’t check in for the flight within 10 minutes of the 24-hour window you are guaranteed a late B or C boarding position.

152 Alain April 12, 2017 at 1:28 am

“Addendum: This is also a story of price controls, on that let’s turn the microphone over to Air Genius Gary Leff:” — in what world is this a story about price controls? In no way is there a maximum limit on the contracts that the airlines can offer to passengers. There is a price control on the floor, and while that is a bad idea, it didn’t come up at all in this case.

As for the stock drop, I wish I had been following this *useless* story I would have bought the stock as soon as it fell, since this will have no impact *none* on UAL. Sadly the stock has almost recovered.

Finally there is only one correct interpretation of what happened: the doctor was entirely in the wrong. The end. He disobeyed a lawful order since he thought he was more important than the law. Hopefully as he convalesces he will come to the realization as to how entirely wrong he was.

153 Roy LC April 12, 2017 at 1:40 am

Oh there are other “correct” conclusions.

1. The overbooking issue has enough public outrage that at least one politician could probably profit from it.

2. United has really shown what not to do when it comes to PR, whole chapters of business books of the sort sold in airports could be written on it.

3. Maybe CSX and AT&T are not good places to hire an airline CEO when their is concern about customer service.

4. Maybe Chicago Airport police need better training and supervision, the falsified “he fell” police report was impressive. I suspect that as Black Lives Matter declines room will exist for a more general anti police violence push. Whether successful or not more people than Radley Balko should be able to turn this into an income opportunity.

5. China’s combination of mass social media with its huge list of banned subject means that any topic not banned can really blow up there.

6. Something about smartphones.

And so forth

154 Alain April 12, 2017 at 2:10 am

(1) will clearly happen. Politicians are, generally, horrible people.

(2) Agreed. They should have stuck to their guns: this doctor has a highly inflated sense of self worth. He is scum.

(4) I bet he did fall after he resisted lawful orders. I hope that they throw the book at the doctor. And I hope that we have streaming video as he gets what he deserves in at prison, time and again.

155 JThomas April 12, 2017 at 3:01 am

LOL you sound like a horrible fascist. Let’s count the number of people who disagree with you: United’s CEO, the law enforcement agency that took the Dr. out, the passengers on that plane, the entire public, and numerous attorneys (e.g. http://hollywoodlife.com/2017/04/11/united-airlines-passenger-suing-david-dao-lawsuit-dragged-off-plane/)

So you lose Alain. Go back to your pathetic existence.

156 Alain April 12, 2017 at 3:32 am

While it is irrelevant, it turns out the “doctor” is, in fact, a sack of shit. Likely this will convince the mob to drop this particular case.

You lose liberal. You lose for entirely the wrong reasons, but you lose.

157 Jthomas April 12, 2017 at 3:47 am

Character assassination. Nice. Really relevant to the issue at hand /s

BTW that came out before the Munozs last statement. He obviously disagrees with you that the Drs past from 10 years ago mattered. Dr is going to be a multi-millionaire! Must hurt your​ precious snowflake feelings so bad. And no not a lib.

158 Alain April 12, 2017 at 4:28 am

Not one dime past 1350.

And throw the book at the scumbag. Multiple felonies, 100% chance of successful prosecution. So savory.

159 prior_test2 April 12, 2017 at 5:30 am

‘100% chance of successful prosecution’

Of the security officer that assaulted a passenger? Probably not, he will just most likely just lose his current job. And if you mean the passenger, the odds are quite low – all of his actions after his head slamming an armrest due to the actions of the security officers will likely be more than adequate as a defense for subsequent actions after being dragged off the plane. And the actions that led to his being dragged off the plane seem to be not well grounded in the law, to put it mildly. Besides, why should he bother to file assault charges at this point – United will be paying the freight, so to speak, while the officer was just a flunkie.

160 Willitts April 12, 2017 at 8:23 am

Alain is not wrong. He’s absolutely correct. But he expresses this truth with the security of someone whose name isn’t in the caption of a lawsuit with the word “Defendant” under it.

161 Jthomas April 12, 2017 at 8:42 am

Willits. You are incorrect as well as Alain. All lawyers looking at this say so. If you disagree, cite the Dr’s felony and where he broke his end of the contract. Otherwise STFU. Cheers

162 Daniel Weber April 12, 2017 at 12:33 pm

“All the lawyers say so”? Lol.

163 Ricardo April 12, 2017 at 2:54 am

“1. The overbooking issue has enough public outrage that at least one politician could probably profit from it.”

Gary Leff’s article is on point. This flight was not overbooked and there has been a long-term trend toward fewer passengers being bumped due to overbooking. Which is to say, yes, some politician will probably latch onto overbooking as a serious problem in need of legislative remedy. But I agree with the rest of what you wrote.

164 Thiago Ribeiro April 12, 2017 at 8:22 am

Yes, it was. They sold more seats than they could provide.

165 Willitts April 12, 2017 at 8:24 am

Yes they overbooked but the real issue was the flight crew that needed transportation. But for that crew, it had managed it’s overbooking well.

166 russell1200 April 12, 2017 at 12:23 pm

No, they had the correct number of seats available. They just choose to add their own employees to the list.

Per the regs with the FAA, once the passengers are in their seats, the airlines has lost its right to those seats. The police are not “government” police, but private police paid for by the airlines.

It probably won’t happen, but the various United employees, and “police” could face some very serious charges. This isn’t even a low grade form of kidnapping to get thrown in with the assault/battery charges.

167 Anon7 April 12, 2017 at 3:36 am

3. People who want to travel on the cheap should not expect great service. The main fault is that the airline hasn’t figured out a way to cash in on getting people to pay a premium to avoid being bumped.

168 Michael April 12, 2017 at 3:55 am

Not true. Airlines have figured out how to charge for this and regularly do so.

Higher class tickets reduce chances of being bumped.
Seat assignments also significantly reduce chances of being bumped.

Regular travellers understand this and make choices on whether the increased costs are worth the reduced bump risk. A previous employer of mine even had a policy that required employees to pay for seat assignments on flights because they recognized the value of that tradeoff.

169 Anon7 April 12, 2017 at 5:18 am

Those are mainly indirect ways of reducing the chances, which the airlines do not put much emphasis on advertising.

170 Darren M. April 12, 2017 at 4:31 pm

Some tickets are refundable at an addition price. Others are not refundable at all. Or they might have a fee to refund a ticket. There there are the no shows who did not have refundable tickets. In these cases, the airlines wants to sell the seat a second time even though it’s already been paid for. I’m sure this is all in the agreed terms at the time of purchase, though.

171 Steve Schow April 13, 2017 at 1:07 pm

@Anon7 “Those are mainly indirect ways of reducing the chances, which the airlines do not put much emphasis on advertising.”

I don’t think the airlines are keen on advertising the fact that they have to involuntarily bump paying customers from flights. The negative PR of highlighting this fact isn’t worth the extra revenue from paid seat assignments, higher class fares, etc. I could see the first airline doing this getting laughed at and mocked heavily on social media.

172 Gary Leff April 12, 2017 at 1:36 pm

“in what world is this a story about price controls? ”

United had no legal liability higher than 4x the one way fare capped at $1350, per DOT regulations, and the ability to sue airlines is heavily limited.

173 asdfasdf April 13, 2017 at 1:24 am

When comments start with, “there is only one correct interpretation of what happened,” you know it’s going to be great. Yes, the law as written clearly enforced justice here, and that doctor deserved to get dropped on his head and dragged off the plane. Bravo sir, bravo.

174 Steven Sailer April 12, 2017 at 1:30 am

Doesn’t the captain of a ship or plane have final, arbitrary authority over who is on board when he embarks?

175 Artimus April 12, 2017 at 8:38 am

Yes

176 Michael S. April 12, 2017 at 9:39 am

sure, if he can handle the consequences

and here it starts to matter if he saves everyone’s lives in a storm or if he marginally improves his bosses profit by exploiting an obscure clause in the conteact (like the lawyer he is…)

177 Artimus April 12, 2017 at 11:00 am

There are usually no consequences as long as done properly. I have offloaded passengers often in my career for being drunk, disruptive or not following the instructions of the crew. In over 20 years I have never been questioned on it.

178 Daniel Weber April 12, 2017 at 12:34 pm

Those matters can be brought to bear in a courtroom, after the fact.

179 Jim April 12, 2017 at 1:40 am

Air Genius treats $800 they offered as equivalent to the $1350 they should have offered. Or am I missing something?

180 Roy LC April 12, 2017 at 1:44 am

Also they were offering a crappy United voucher, it wasn’t something useful like a Southwest one, and Amazon gift card, or you know actual cash.

181 Alain April 12, 2017 at 2:14 am

I’m sure that they were offering cash, since they are required to grant cash by law (if the passenger requests).

182 mkt42 April 12, 2017 at 2:46 am

What makes you think they were offering cash? On about 1/3 of the flights that I’ve taken, the gate agents have asked for volunteers to give up their seat due to overbooking. Not once have they offered cash; it’s always either a voucher for a future trip on the airline (often United in my case), or a voucher for a certain dollar amount towards a future trip on the airline. Never have they offered cash.

If the passenger has to request it, that’s not an offer, it’s a response.

183 Unanimous April 12, 2017 at 4:39 am

I was offered cash at the gate once some time ago. They appeared to be offering it to all people traveling alone. We had to stand aside until someone accepted it. It was $250 from memory. It was the last flight of the day and there was also a hotel voucher and a booking on the next flight in the morning. Seems a lot better than physically dragging someone out of their seat.

184 Andao April 13, 2017 at 12:47 am

If you volunteer, they don’t have to give you cash. If you are involuntarily bumped, they have to pay cash (up to 4x the price of the ticket).

Pro tip: never volunteer.

185 JWatts April 12, 2017 at 9:23 am

“I’m sure that they were offering cash, since they are required to grant cash by law (if the passenger requests).”

Most flights I’ve been on they offer vouchers. I accepted one once and am leery about their value now.

Often, vouchers are a) limited to the airline in question b) expire (usually within one year) c) may have black out dates and d) can’t be used with other promotional offers. This means vouchers are worth substantially less than cash.

186 Daniel Weber April 12, 2017 at 12:36 pm

They are required to offer cash only in the case of an involuntary bump, but when seeking volunteers to take a later flight they do not need to offer cash. They could offer an origami crane and if someone accepted it, okay.

187 efp April 12, 2017 at 11:48 am

I bet if they actually offered cash instead of vouchers, they would have found takers.

188 Douglas Levene April 12, 2017 at 1:54 am

Let me bring some legal analysis to this issue. United’s legal right to remove that passenger depend entirely on the contract of carriage. That is the lengthy document prepared by United that is part of every ticket. The language at issue says that passengers may be “denied boarding involuntarily” because of “overbooking.” The legal issue is what “boarding” and “overbooking” mean.
I see at least two possible interpretations of “boarding”: (1) getting on the plane and sitting down, and (2) getting on the plane, sitting down and staying there until takeoff. I can think of reasonable arguments for both. In a word, the contract is ambiguous, because it is susceptible of inconsistent interpretations. Happily, there’s a rule of contract interpretation to help us out. That rule says that a contract of adhesion – a form contract like the one here – is interpreted against the drafting party where different interpretations are possible. If the court were to apply that rule, it would hold that what United did was not deny boarding, which is permitted, but something else, which is not. (2) The second issue is whether the action was taken because of “overbooking.” The overbooking rules were adopted to protect the airline against the risk of no-shows. That is inapplicable here, because the airline did not decide to put its employees onto the flight until after the plane was already full, so the airline knew that there was not any “no-show” problem. United conceded this on Tuesday when it admitted that the plane was not overbooked.

189 Dan Lavatan-Jeltz April 12, 2017 at 2:21 am

The aircraft is United property, so they can exclude anyone even though it is not covered by the boarding provision. This just means they are in breach of the contract and are civilly liable for actual damages. He still has to get off and is liable for not doing so, and the liabilities probably about cancel out.

190 JThomas April 12, 2017 at 2:52 am

Wrong. He was already there and not trespassing! He has a right to be there and is NOT liable for that. If I tell the cops that you need to be removed from your legally leased apartment and the cops do so without checking that it is proper to do so, how in god’s name is it your fault you are forcibly removed??

191 Ricardo April 12, 2017 at 3:02 am

I’m not a lawyer but the difference is that there is a body of law that says that, as a tenant, you have a right to occupy the space you leased up until the moment a court orders your eviction. An airline ticket is not a like a lease and includes fairly broad language in the contract of carriage giving the airline the authority to remove you from the flight. If you don’t agree with the airline’s decision to order you off, you have the option of suing them in civil court after the fact and blasting them on social media for questionable judgment. You don’t have the option to refuse orders given by the crew and by aviation police and insist on litigating the matter while the pilot and crew are preparing to take-off.

192 JThomas April 12, 2017 at 3:31 am
193 JThomas April 12, 2017 at 3:36 am

And by the way you DO have the option of not following an unlawful command. Do not believe that you have to follow the crew or law enforcement instructions at all times. You may pay for it with bodily harm but you will not be charged or liable

194 Ricardo April 12, 2017 at 5:00 am

“If not a lawyer why comment.”

Your analogy to a leased apartment is clearly wrong. As I said, this guy has the same access to the courts as anyone else does and can sue the airline for any inconvenience caused. Whether it is a valid claim or not I leave to others.

195 Willitts April 12, 2017 at 8:27 am

You have the option to sue only if the compensation they gave is inadequate. The airline has an absolute right to deny service.

196 Jthomas April 12, 2017 at 8:47 am

Did you two even read the link I posted? LOL you haven’t because you haven’t addressed what the lawyers say. And if a leased apt analogy is wrong, fine. But you still haven’t addressed what is deficient with the lawyers claims. So please, put up or shut up. Denial is the first step on the road to recovery. Only 4 stages left

197 Daniel Weber April 12, 2017 at 12:40 pm

Guys, why aren’t you reading the astute legal analysis at hollywood life? C’mon guys!

If you are in a movie theatre that you paid for and management wants you out, that’s trespassing.

“But I paid for the seat!!” That’s a great argument. It should be brought up in a court of law. You don’t fight with the cops about it.

The legal system does not work if the cops cannot arrest someone or remove someone for trespassing without listening to the accused’s really good argument first. A lot of people seem to think they have the right to argue with the cop to prove that things are unfair. No. That comes later.

You can beat the rap, but you can’t beat the ride.

198 Doug April 12, 2017 at 3:03 pm

“An airline ticket is not a like a lease and includes fairly broad language in the contract of carriage giving the airline the authority to remove you from the flight.”
Except that you’re completely wrong. The contract of carriage in this instance specifically limits the reasons for which the airline can remove you from a flight, none of which were applicable to this situation. The overbooking rule allows the carrier to deny boarding, not remove you from a flight.

199 Douglas Levene April 14, 2017 at 1:11 am

Dan, That’s not clear. In legal terms, the question is whether a court would order United to honor the contract or would permit United to breach it and pay damages for breach. In the vast majority of cases, you are correct, courts will not order a party to perform a contract. However, there are extreme cases where they will. One could be a situation like this – a last second breach, with no alternative flights available and pressing reasons for the passenger to fly (assuming his medical appointments the next day were critical for his patients). If Dr. Dao had gotten a judge on the phone as the security officers were walking towards him, it’s entirely possible the judge would have granted a TRO in this case.

200 Kevin- April 12, 2017 at 11:41 am

@Douglas Levene, thanks for this clear legal analysis. In both Tyler’s post, and many of the comments here, there is an astonishing amount of contortions going on to excuse or justify this event, or to at least explain that while it may look bad, it’s really not so big a deal. United has been on thin ice for many years, and has long been our carrier of last resort. This is probably their death knell.

201 msgkings April 12, 2017 at 11:58 am

Nope. Stock is barely down. They have the routes and they won’t have to give them up and people will still have to use them especially in SF and Chicago. If Wells Fargo and BP are still around United will be too.

202 Sam April 12, 2017 at 6:27 pm

Douglas your analysis is closest to the one I heard Mary Schiavo, former Inspector General whose opinion I think counts for more than most of the commenters here and Tyler. She argues that a) this does not qualify as denied boarding since he had already been allowed to board, and b) this is not an overbooked situation since it was about transporting United crew and technically not an overbooking. In addition, she says United should have followed Federal guidelines which they did not (a number of steps here, including upping the payments, giving the doctor a written explanation of how he came to be picked etc.). She also argued that according to Federal rules, he should have asked for $1350 in cash or check on the spot if he were to be removed. The last action she claimed would probably have left him on the flight because it was unlikely that the flight agent would have that much cash or a check book on hand. I would like to think she knows the laws on this better than most non-lawyers and economists who think they know the law but are mostly revealing their own pre-conceived notions and biases.

203 Nominull April 12, 2017 at 2:05 am

“One problem with using money to buy people out of queues is that it encourages more upfront queuing to begin with.” Only if it’s free to queue. In this case, joining the queue costs hundreds of dollars, increases in price as more people enter the queue, and eventually stops being possible once enough people are queued. “I don’t know of many retail markets that rely on price alone to ration quantity” this one doesn’t either, it sells a limited supply of tickets!

204 mkt42 April 12, 2017 at 2:52 am

Right, I think Tyler has made some poor modeling choices an analogies in this post. What sort of upfront queueing does Tyler think will be encouraged? To buy a ticket and not use it incurs a substantial financial penalty, either in the form of a reservation change fee or a higher ticket price for a refundable ticket.

205 Jon April 12, 2017 at 5:49 am

The other problem, besides the price, if you are in the queue you will eventually end up far away from where you want to be. The system only encourages queuing by flexible people choosing the flights most likely to be overbooked.

206 prior_test2 April 12, 2017 at 2:06 am

‘I agree the man should have left the plane in the first place’

Of course you do. But as noted in the Simon thread also, ‘According to the discussion here, United was likely not actually legally right – ‘”Failure to follow flight crew instructions” – you mean the instructions to leave in violation of the Contract of Carriage? Rule 21 spells out the only reasons United can remove someone from an aircraft, none of which applied to this customer. By boarding him, they threw Rule 25 out the window. ‘ http://www.airliners.net/forum/viewtopic.php?f=3&t=1360189

‘First, due to social media it will be increasingly difficult to write and enforce retail contracts with legal meanings very different from their “common sense” meanings.’

Or vice versa – United seems to have actually violated its contract, as noted by people less interested in defending the rights of corporation when it comes to ignoring their contractual obligations.

‘The more you complain, the more you are redistributing wealth — through the medium of preferred price-quality configurations — away from lower earners and toward the wealthy.’

Beyond parody.

207 Slocum April 12, 2017 at 10:41 am

You are aware, aren’t you, that in the ‘good old days’ (back before Jimmy Carter got rid of our benevolent masters at the CAB), involuntary bumping was standard operating procedure? Note, too, that government regulations sanctioned United’s actions and government agents (airport police) were the ones who brutalized the passenger. But the market is overruling all that. Going forward, United will have to bow to the demands of paying customers. So are you with me, prior — 3 cheers for the market?

208 prior_test2 April 12, 2017 at 1:38 pm

Actually, sadly, I do not personally remember the age of passenger airline travel before starting to use People Express to travel the Eastern Seaboard, the government pet airline World Airways to travel to Germany. (Where security seized both jars of Skippy peanut butter before allowing me past the checkpoint, oddly enough.)

Nobody was ever bumped off a People Express flight, which collected cash from the passengers, if memory serves.

‘Note, too, that government regulations sanctioned United’s actions’

This, to put it mildly, is wildly wrong.

‘3 cheers for the market’

Only if it is the Soziale Marktwirtschaft – sadly, wikipedia is pretty much the only English language site with a decent explanation. https://en.wikipedia.org/wiki/Social_market_economy

209 Slocum April 12, 2017 at 2:56 pm

“This, to put it mildly, is wildly wrong.”

How so? United certainly believed it was following FAA regulations regarding overbooking and their legal authority to call authorities to eject passengers? The only way they may have been wrong is those rules may not apply after boarding as they do before boarding, but that is not an obvious legal call.

210 Dan Lavatan-Jeltz April 12, 2017 at 2:24 am

The bigger problem is the US prohibits efficent crewing. If the needed a pilot in whatever state he could have taken the jump seat in the cockpit. All flight attendants are useless, so stick a co-pilot in a crew seat on the first flight, and operate the second with no attendants. Everyone could have stayed on, it would have saved fuel and made passengers happier, and basically this would make everyone a lot better off.

211 Willitts April 12, 2017 at 8:28 am

Flight attendants are not useless. They are essential safety personnel.

212 ddh April 12, 2017 at 12:30 pm

Flight attendants are useless in the cockpit jump seat. Put a pilot or first officer there, but no harm is done if all four flight crew were flight attendants, and one sat in the cockpit.

213 Ricardo April 12, 2017 at 2:24 am

Gary Leff’s article is very informative and worth reading in full. The issue here was that United needed to send to board several of its employees on this plane so they could serve on a flight leaving from Louisville. When planes do not have the required number of crew members, everyone on that flight gets inconvenienced and delays can quickly cascade through the system. From a utilitarian perspective, having four passengers take a later flight is far better than causing delays for hundreds of passengers in other airports. That said:

1. United did not offer as much compensation as it could have. It should have maxed out its offer before randomly ordering people off the plane and even involving the aviation police.

2. Airlines should have more flexibility (esp. through union contracts) to get employees to work at remote airports without inconveniencing its own passengers. $800 or $1,000 per person might have been enough to send their employees on a Delta, Southwest or American flight going to the same airport, for instance.

3. This looks more like an excessive use of force issue by aviation police than an airline issue. Ultimately, when you buy a ticket, the carrier is promising to get you to your destination — not necessarily on the exact plane with the flight number listed on your ticket —
within a few hours of the stated arrival time. When the carrier can’t do that, they have to pay compensation (unless it is force majeure in which case the airline legally owes you nothing) but it isn’t a monumental injustice. Again, potentially hundreds of passengers would have been subject to delays and cancellations had the airline not made space on its flight for its employees.

214 Michael S. April 12, 2017 at 10:18 am

your argument proves too much: on utlitarian grounds, there is no limit to what you have to put up with, as ling as ere are enough people who can profit from your inconvenience

No, it’s UA’s job to organize their processes and avoid disruption. If they make a choice not to have spare capacity, I commend them, but there’s a price, occasionally, and THEY have to pay up. That’s where they tried to CHEAT.

I don’t really care exactly how UA solves this kind of situation, but come on, it can’t be that rare. Makes me think there’s something wrotten either with their process, or with how they advertize their product (i.e. buying our ticket gives you a 98% chance in a flight lottery. May thenodds be ever in your favor)

215 desack April 12, 2017 at 2:25 am

United’s stock has dropped losing about $255 million in value. Surely this will bounce back eventually, but not for a while, and maybe not fully. That should be accounted for when deciding what to do because they are too stupid to schedule their employees in the right city on the right day. I actually interviewed at United for an analyst position and was not impressed to say the least. These stories coming out do not surprise me at all. The HR lady tried to chide me about my “sloppy” resume because I had a “typo,” which consisted of just the letter “R”…because I have some experience with the R programming language. I declined the round of interviews after talking with people in the stage past HR. It seems like they go for college kids from 5 or so schools, and relatives, pay them nothing, wonder why they are all the same and have the same strenghts/weaknesses, and then repeat the same process.

216 mkt42 April 12, 2017 at 2:56 am

Heh! Your story about the hiring person not recognizing R deserves wider distribution. R is growing rapidly in popularity — and at least one airline has personnel who are clueless about it.

217 ChrisA April 12, 2017 at 2:47 am

When I saw this incident it made me think that the quasi monopoly that the incumbent airlines have in the US is even stronger than I previously thought. No corporation that had to compete for customers would ever treat people that way. Even if you argue that they had a right to do what they did thanks to the contract they should have realised that it just wouldn’t seem fair to most people (I am actually surprised by the amount of defenders of United I have seen online). So the question for me, is why is the airline business a monopoly? Is it due to it being a natural monopoly due to network effects? Or is it more like the car dealership business where there has been regulatory capture?

United are arguing that they need these rights in order to keep fares low. But surely they should have thought about how to exercise these rights in a way that avoids this aggravation. Maybe they can no-bumping rights to anyone who really needs to fly, with a certain limit per plane allowed. Maybe they could just do it by check-in time, somehow to me it seems fairer to say to someone that they checked in too late as the reason they are being bumped. I did have this happen to me once, now of course I check-in as soon as online check in opens as a result.

218 Roy LC April 12, 2017 at 3:34 am

A big part is that landing slots are limited and their distribution controlled by the part of airport governance run by the airlines using the airport. This is in addition to the considerable normal government regulatory hurdles. Thus it is effectively impossible to start up a competing airline in many markets.

The saga of Sun Country and it battles against Northwest (now Delta) at MSP is very informative.

219 Ted Craig April 12, 2017 at 9:13 am

There are also too few airports due to NIMBYism: http://www.ocregister.com/2012/03/05/voters-killed-el-toro-airport-10-years-ago-today/

Detroit could really use a second airport and obviously there is plenty of land in the city proper, but it’s never going to happen.

220 Roy LC April 12, 2017 at 6:21 pm

Certainly, but the problem is made signifigantly worse by handing control of airports to the airlines using them under the assumption that they are the users of the facility and the citizens of the metro the airport serves are not.

221 Ethan Bernard April 12, 2017 at 10:16 am

Northwest has done great damage to Minneapolis- St. Paul over the years through monopoly pricing.

222 Roy LC April 12, 2017 at 6:25 pm

I have multiple friends that fly without luggage into MSP on one way flights by booking to Chicago and getting off at the change. Even with the extra cost involved in buying a one way this was worth it. This has become enough of a problem that a year or so ago they checked our tickets before letting us off a through flight.

223 Joe Torben April 12, 2017 at 3:26 am

As every other commenter has noted, this was Tyler’s worst post in ages. Did someone hack his account? How can he be factually wrong on so many counts? Is this some sort of weird test?

Anyway, I’d like to point out this particular oddity: “One problem with using money to buy people out of queues is that it encourages more upfront queuing to begin with, and that involves negative externalities for passengers as a whole.”

This is certainly true in some (many?) scenarios. However, it is obviously implausible here. About one passenger in 10,000 gets paid to leave, and an overwhelming majority of those do accept the lower offers United tried to get away with here. Is the hypothesis that people will fly more because there is a one in a million chance that they will be paid $2,000? And if so, wouldn’t that be extraordinarily good news for the airlines? Paying $2,000 (or even $10,000) for a million passenegrs seems like a fantastic deal.

As usual, a normal market soultion would work. The only one surprised by that is, apparently, the moron who hacked Tyler’s account.

224 prior_test2 April 12, 2017 at 4:20 am

‘this was Tyler’s worst post in ages’

Or one of his best – it is rare for Prof. Cowen to be so blatant in advocating for the divine rights of corporations.

225 Larry Siegel April 12, 2017 at 4:45 am

C’mon, there are whole web sites explaining how to get bumped and compensated. Moral hazard is a real thing.

226 Joe Torben April 12, 2017 at 5:24 am

Links?

227 prior_test2 April 12, 2017 at 5:33 am

I think you may have meant ‘assaulted’ instead of bumped, right?

228 Willitts April 12, 2017 at 8:30 am

For people with extremely low opportunity cost for their time. I just saw a news clip of people who get paid to wait in line for tickets. This is just another version of that.

229 peri April 12, 2017 at 11:22 am

I dunno. Once upon a time (contemporaneous with getting dressed up to fly) missing something as important as a flight would have been a sign, at least in my decidedly middle-class family, of negligence and waste. There’s moral hazard in selling “flexibility” at a premium.

230 Zach April 12, 2017 at 8:43 am

Glad someone caught that, too. Have seen a few argue that if they’d offered the max $1350 then everyone would hold out for 1350… not unless they act collectively which isn’t practical on a flight this size. $800 in blackout-restricted UA vouchers with an expiration date (I’m guessing that’s what the offer was) is worth maybe $300 to me if that… didn’t come close to the $1350 cash max.

231 Zach April 12, 2017 at 9:16 am

Note as pointed out later in comments there’s no cap on voluntary compensation, but everyone kicked off the flight involuntarily would get 400% of the ticket price or $1350, whichever is lower. Lots of confusion on the $1350 issue including my own. It’s a de facto cap on voluntary compensation but UA has the authority to exceed it and obviously should’ve done so here.

232 Darren M. April 12, 2017 at 4:45 pm

I also wonder how well that offer was communicated to the passengers.

233 Dan Wang April 12, 2017 at 3:32 am

I’m not a constitutional lawyer, so I hope one can jump in… wasn’t there a Supreme Court case, not too many years ago, which ruled that although the government has to provide certain services, people can have no expectation of service in any particular instance? I believe it had to do with a failure of police protection.

I don’t know if the legal reasoning there can be analagous here.

234 Willitts April 12, 2017 at 8:35 am

You are correct about police protection

DeShaney v. Winnebago County
Castle Rock v. Gonzales
Warren v. District of Columbia

I don’t think those cases have applicability here. These involve public duty and the United case involves contract law.

235 Ben April 12, 2017 at 3:39 am

Reality is second-best and the equilibrium is general, not partial. But that analysis takes longer and requires more actual knowledge, so the first-best, partial equilibrium version always gets around the world before the more substantial arguments have got their boots on.

236 Andre April 12, 2017 at 3:55 am

Is there no Libertarian view that the state shouldn’t be getting involved it what is just a dispute between a company and a group of customers? The corporation’s poor planning and scheduling leading to a dispute after the passengers have already boarded the plane gives them the right to call on police to solve the issue for them?

I think the ‘disrupting the flight to the police can drag you up for any reason’ takes shows how baked in our acceptance of state violence is.

Also how great would an interview with the guy who came in and sat in that seat be? He must have taken a lot of grief on that plane.

237 Ricardo April 12, 2017 at 10:34 am

What is the libertarian purist view here? On the one hand, the passenger did have a ticket (subject to a very lengthy set of terms and conditions that he theoretically agreed to) and, on the other hand, the aircraft is private property. A libertarian might say the airline should hire its own private security guards to remove passengers if they don’t leave voluntarily. But then what if the passenger thinks he has a right to be there and decides to resist? Can they fight it out under MMA rules? Or maybe do we need the state to step up and issue rules or legislation saying, definitely, that either a passenger properly seated who is not causing a disturbance has a clear right to be transported to his destination (whatever the fine print in the contract may say) or else that passengers can be asked to leave, put on a later flight, and paid $1,300(++?) or so for their delay of a few hours? Libertarian theory is not obviously superior to common law, legislation and regulation in resolving disputes like these.

238 Daniel Weber April 12, 2017 at 12:43 pm

Anyone can call the police to remove a trespasser from their property. It is, in fact, the preferred societal solution, because police have oversight and review. Probably not enough, but a lot more than private security people do.

239 Peter Watt April 12, 2017 at 4:02 am

I’m a bit suspicious of the proposition that the passenger was selected at random for bumping off the flight. I think it quite likely that “selected at random” involved some discussion by staff of who would be an easy person to bump. It turned out that the guess was wrong.

I don’t think that fining late no shows 100% of the fare would completely solve the overbooking problem. Airlines would still want to overbook, albeit to a lower percentage.

240 FE April 12, 2017 at 7:46 am

+1 United’s policy does not say anything about randomness or algorithms. Also, portion Tyler quotes says priority “may” be determined according to those criteria. That is, it may or may not be.

241 Daniel Weber April 12, 2017 at 12:44 pm

They bump the cheaper fliers first, because the government-mandated compensation is a multiplier based on the ticket price.

242 E Thomas April 12, 2017 at 4:08 am

“In essence, individual companies under-invest in perceptions of fairness, and reliance on “truly random” algorithms can make this worse rather than better. A deliberate human chooser might well have done better, if only by knowing that a public defense of the choice would have been required, and that might have nudged United back toward the full auction or some other solution.”

A deliberate human chooser would likely over-pick a more passive group, such as women. That’s great for United’s PR—women are more likely to leave the plane without causing a scene—but bad for women—they would be systematically more likely to be bumped from flights.

In the interest of actual fairness, I hope United keeps it’s “truly random” algorithm.

243 Axa April 12, 2017 at 4:58 am

“…..contracts with legal meanings very different from their “common sense” meanings.” I think this is the issue.

As a passenger I’ve assume the definitions of ticket and boarding pass are proof of fare payment from A to B and having a seat in a specific scheduled flight respectively. Passengers assume the re-accomodation process occurs before a boarding pass is issued, or at worst before you board the plane. Why the 4 passengers were not blocked at the gate 10 minutes before they seated in the plane? Indeed, my common sense tells that there’s should be a deadline for re-accomodation, I thought this deadline is when you pass the last boarding pass check at the gate.

Some local United manager should have said: the passengers are seated, the deadline for re-accomodation was 10 minutes ago…….we lost. The problem here is that the United’s business culture does not take a “we lost” as acceptable outcome. This event is not an outlier, it’s common business practice. Involuntary denials of boarding in United is 3 times as much as Delta and twice as much as AA. http://www.economist.com/blogs/graphicdetail/2017/04/daily-chart-6

Involuntary denials of boarding means “denials of boarding” not dragging you out of the plane. So, don’t mask this event as a re-acommodation or involuntary denial of boarding. Use the proper description: use of force to remove passenger valid ticket and boarding pass from the plane because deficient company scheduling.

244 Axa April 12, 2017 at 5:05 am

There should be a deadline for re-acommodation. Imagine you’re already seated on the plane, sending the last message before putting the phone on flight mode: “honey, I’m on flight 2956, arrive at 19h45, see you at the airport”. It seems you can’t do this with United, until the plane is already taxing to the runway.

I appreciate Tyler’s game theory framing but he’s missing something important. Games are not eternal. Games start and games end. In this case the game starts when you buy the ticket, but it would be great if United clarified when the game ends. It seems, the game does not end when you are seated on the plane. So, when does the game ends?

245 peri April 12, 2017 at 10:02 am

This sounds right to me, no matter all the stuff about “hundreds more people would be inconvenienced” if those flight attendants didn’t get to Louisville. And given that some airline has lately even added “how to behave on a flight” tips to its own advertising, it seems stupid to have a game that is only going to go well if everyone acts very sportsmanlike.

246 The Lunatic April 12, 2017 at 4:35 pm

There is, in fact, an implicit deadline. United’s own Contract of Carriage talks about denying people boarding if there’s no seat for them, but the provision for expelling a passenger does not include any right to do so to free a seat for another passenger.

247 David Wright April 12, 2017 at 5:09 am

Gary Leff presents the fact the flight was not overbooked in the usual sense was exculpatory for United, but in my book it makes United look much worse. In a traditional overbooking, you have two customers with a claim to the seat, so at the gate the carrier is going to have to screw one of them. Yes, overbooking sucks, but we all expect it, and standing at the gate you are sitting across from other passengers in the same situation. But in this case there is just one paying customer with a claim to the seat, and in the moment the passengers see themselves being screwed over for the benefit of an employee. That’s a major no-no in customer relations. It’s as if Nordstrom had just one left of a dress you want; you paid for it and head for the door; the clerk runs after you and says “actually, I’ve decided to take that dress for myself; here’s some cash (that’s maybe more, maybe less than you paid); you have to give it back to me”.

Leff waves his hands about “union regulations” making it hard to get the employees to point B any other way, but unless he can cite specifics, I am very skeptical. What interest does the union have in insisting on such a rule? And would it really forbid all possibilities, including: company car to point B, pay employee to drive to point B, pay another carrier to fly employees to point B, hire a private jet to fly employees to point B?

Personally, I’d be much assuaged if United would simply announce that traditional overbooking would continue as usual, but under no circumstances would United ever bump a passenger to transport an employee. For bonus points, they can announce that when bumping people, they will always offer the statutory maximum compensation to volunteers before involuntarily bumping anyone.

248 bill benzon April 12, 2017 at 1:51 pm

Right.

Similarly, if you look at the relevant part of United’s Contract of Carriage, which indeed is Rule 21, “Refusal of Transport,” you will see a remarkably long list of situations and types of passengers, including “have or cause a malodorous condition (other than individuals qualifying as disabled), those who violate United’s policies regarding voice calls, and pregnant women in their ninth month, unless they have a recent doctor’s note (pray tell, since when are airline personnel expert in determining how far along a pregnant woman is?). And again you see nothing remotely like a “we need the seat for business reasons” or a catchall “because we feel like it”.

From this post at Naked Capitalism: http://www.nakedcapitalism.com/2017/04/united-passenger-removal-reporting-management-fail.html

249 Jon April 12, 2017 at 5:51 am

Few people seem to wonder—if the Dr. really did have patients, how would you feel if a loved one had an appointment canceled because of the removal of the Dr from the plane and that appointment was to deal with a potentially severe disease?

250 OldCurmudgeon April 12, 2017 at 2:24 pm

Fair point. The utilitarian arguments here need to consider all of the costs.

251 Deek April 12, 2017 at 6:01 am

Tyler does realise that the Ryanair story is from a satirical website, right?

252 prior_test2 April 12, 2017 at 7:54 am

In all fairness to Dr. Cowen, it is extremely hard to parody Ryanair. After all, this was real – ‘Ryanair has confirmed that it is pushing ahead with its controversial scheme to charge passengers for use of toilets on its aircraft, meaning spending a penny on a flight will soon cost as much as a pound.

The no-frills airline is working with Boeing to redesign the cabin and develop coin-operated toilets on 168 of its planes.

Not content with charging passengers for use of the facilities, the airline is also looking at reducing the number of toilets on board, leaving just one available cubicle for up to 189 passengers.’ http://www.dailymail.co.uk/travel/article-1263905/Ryanair-toilet-charges-phased-in.html

253 Slocum April 12, 2017 at 9:32 am

I don’t believe that ever happened, but conceptually — why not? Do you object to pay toilets in general? And there’d be little point in charging if they couldn’t remove a toilets and add seats (and thereby also reducing each passenger’s carbon footprint). Also Ryanair flights are generally quite short, so most passengers aren’t going to need the facilities (especially if they make a point of using them on the ground before departing — and the pay toilets would give them an incentive to do that).

254 prior_test2 April 12, 2017 at 9:51 am

The planning happened, and they were so roundly ridiculed for it in various media (the German media also had a field day) Ryanair dropped it. Nonetheless, the airline did publicly announce this as something it was considering, and even the most cynical believer in the idea that all publicity is good publicity wouold agree this was going too far, hurting whatever remaining positive image Ryanair possessed at the time.

Ryanair is the very definition of getting what you pay for, and no one familiar with them was surprised by this in the least.

255 Slocum April 12, 2017 at 10:30 am

Yes, I remember the outrage. But was the outrage reasonable? Ryanair operates a fleet of no-frills flying buses, and the plan wasn’t surprising, but so what? I don’t find the idea of a pay toilet on an airplane any more outrageous than anywhere else. Less so, in fact — in cities public pay toilets may result in the homeless relieving themselves on the streets, but this is not a problem on an airplane.

256 prior_test2 April 12, 2017 at 1:23 pm

Odd as this may sound, in a free market economy, it makes no difference if the outrage is reasonable. If enough customers are outraged, and decide to vote with their … feet, then Ryanair loses. As turned out to be the case, in the end.

‘I don’t find the idea of a pay toilet on an airplane any more outrageous than anywhere else.’

Good for you – but in a free market economy, the customers in aggregate are what matters to a company, not individuals. Which just might explain why Ryanair, surrounded by other low cost airlines, abandoned its policy of not allowing any free checked baggage, and measuring and weighing every piece of carry-on baggage several years ago.

Nonetheless, this is pretty far astray from the fact that with Ryanair, reality can be even more entertaining than satire.

257 Darren M. April 12, 2017 at 4:46 pm

People would be cutting back on eating and drinking. Less need for the toilet.

258 Latte April 12, 2017 at 6:36 am

http://claireconnelly.com.au/hello-humans/united-will-rough-you-up-before-it-pays-for-its-mistakes/

“UPDATE: So it turns out that ‘The Meeja” confused Dr David Dao, last seen being hauled off a United airlines flight, with another David Dao who was arrested for soliciting a gay prostitute for drugs and now they all stand to be sued for defamation. Hate to say I told you so… More to follow. “

259 rayward April 12, 2017 at 6:36 am

Overbooking is what “caused” the problem, so shouldn’t that be the focus of the remedy? The airline wants a passenger in every seat, but since passengers who don’t show up do pay something for it, it’s not as though an empty seat generates no revenue. Perhaps no shows should be charged the full price, or charged the full price absent advance notice to the airline the passenger won’t be on that flight. Passengers who buy a ticket, show up at the right time, and board the plane are punished because another passenger didn’t. That makes no sense. Punish the passenger who didn’t show up.

260 rayward April 12, 2017 at 6:54 am

The challenge for the quant is that no two passengers pay the same price for a ticket: the airline wishes to accommodate the passenger paying the higher price (which typically means the frequent, business passenger) not the infrequent passenger paying the low price. If the airline chooses not to charge the frequent flyer when she doesn’t show up so as to maintain her loyalty, that’s well and good, but why should the other passengers potentially suffer for the price of loyalty. Again, the airline chooses to punish the innocent for the actions of the guilty, and they do it because they can.

261 Willitts April 12, 2017 at 8:38 am

No, overbooking didn’t cause the problem. The problem was that they had to transport a flight crew to their next origin.

If anything, their problem was not recognizing the need to transport the flight crew sooner and working that into their boarding.

Airlines have an absolute right to overbook and they must do it as a business practice to keep routes and sorties profitable.

262 Chris H April 12, 2017 at 7:55 am

I haven’t anyone in this discussion consider the economic costs overbooking and random removal of passengers. Unlike concert tickets or Nordstrom’s products, air travel forms part of our economic infrastructure, and as such their is a higher cost to uncertainty of outcomes.

Regulators allow airlines to overbook flights because this helps the airlines be profitable, hopefully encouraging more routes and lower prices for consumers. But randomly kicking passengers out of an overbooked plane creates costs: a traveller might miss a subsequent travel connection, an important business meeting, a shift at their job, or a day they’ve already paid for at Disneyland.

Forcing airlines to offer an auction system for passengers to choose to receive payments for being booted from planes discourages excessive overbooking of flights, and also makes sure that the allocation of economic costs is as efficient as possible: those who can afford to be inconvenienced can be compensated for their time, while those who cannot can choose to remain on the flight.

263 Willitts April 12, 2017 at 10:23 am

Airlines often factor in connections when choosing the bumpee. They also consider parents traveling with minor children, military, and preferred customers.

Random isn’t completely random.

You are correct that airlines do not efficiently choose the bumpee because of these externalities unless people can pay more to be immune to bumping. Under such a system passengers would value their own time and aversion to risk.

Government travellers can choose between two rates, with the higher rate guaranteeing no bumping.

The law prescribes a certain payoff for involuntary bumping that may, itself, cause some inefficiency or alleviate it as the case may be. You can go to court if you believe your compensation for the bump was insufficient. The Dept of Transportation even has a guide for filing suit in small claims court.

264 Roy LC April 12, 2017 at 7:04 pm

I would suspect that this system would quickly rise to an even higher rate of overbooking, since those agreeing to be bumped would have no real recourse and be assumed, even by themselves to deserve their fate.

Soon the airline would increase the number of overbooked seats to equal the number of those purchasing bumpable seats minus some number (+or-) accounting for bump cost. Quickly buying a bumpable seat would go from a minimal chance of bumping to a a much higher probability, by this point the non bumping fee would become so standard that few would not pay it and you could easily see flights with no bumpable passengers. This would result in a new non overbooking regime or more likely some new special permission for the airlines to bump non bumpable passengers.

Their woukd be some social cost to this farce, but that would be an externality for the airline.

265 Dick the Butcher April 12, 2017 at 8:08 am

Who is more boocoo dinky dau? Dr. Dao, the security people, United, or people writing hundreds of comments?

266 Slocum April 12, 2017 at 8:19 am

This is one of the situations where the right answer seems so blindingly obvious that I just cannot figure out what all the argument is about. Obviously United should have raised its offer until if found takers. There’s nothing in the regulations that prevent airlines from going above mandated amount (the regs only say that they don’t have to). They weren’t finding volunteers in this instance because A) the plane had already been boarded, B) they were kicking off customers in favor of their own employees, and C) they weren’t offering an alternative flight for almost another full day. So paying extra to keep everyone happy in this highly unusual, not-likely-to-be-repeated scenario would have no effect on the business generally.

267 Willitts April 12, 2017 at 8:42 am

I think we all get what United should have done.

All the arguing is between the “United can do what it wants by law” tribe and the ‘Passengers deserve to get what they paid for” tribe. The debate isn’t being resolved because the two tribes are talking past one another. The former is about law and the latter is about good business practices.

I tend toward the former because I’m a lawyer, but I’m also frequently a business traveller.

268 Slocum April 12, 2017 at 8:52 am

“I think we all get what United should have done.”

Tyler really doesn’t seem to.

269 Kevin- April 12, 2017 at 12:12 pm

Other lawyers are making convincing cases that, in this situation, United actually did not have the legal right to do what they did. In that case, the violence that was inflicted on the passenger will likely lead to major damages, above and beyond the horrendous publicity. There seems to be 2 views of this:
1. United made a PR blunder, but really they have the legal high ground here.
2. United made a PR blunder which is exponentially worse because they did not have the legal high ground.

Right now, my impression is that it’s going to turn out to be 2.

270 Daniel Weber April 12, 2017 at 12:48 pm

If I call the cops to remove you from my property, I’m not liable for the damage the cops do to you. The cops are.

You really, really, really, really don’t want this to be handled any other way. This current situation has bad outcomes, but other systems are much worse.

271 albatross April 12, 2017 at 3:48 pm

Yeah, whatever United was allowed to do by law and contract, having its passengers dragged kicking and screaming off its planes probably isn’t all that great for business.

272 Pearson April 12, 2017 at 12:40 pm

“Would you do “x” for $1?
No?
Would you do “x” for $2?
No?
etc, etc, etc

Betcha there are takers at some number.

273 tt31 April 12, 2017 at 8:26 am

Seems to me Tyler left out the game theory of why it made sense for the passenger to behave as he did in the first place. When airlines jerk me around, I raise as much of a fuss as I can to try to get them to accommodate me better. Sometimes it works, sometimes it doesn’t. But their setup both creates situations where that becomes a possibility, and rewards the behavior, and necessitates a response in one direction or the other by the airline. And it’s worth noting that this incident lowers the credibility of the airlines pushing back as hard in the future. So it seems to me that from a game theory standpoint, United messed up, and that their behaviour created a situation that makes the redistribution Tyler mentions more likely. It’s hard to say that the outcome will be much better than if they had relied on prices more in the first place. (And I’m suggesting that more broadly than just this specific incident – something like this was probably an inevitable eventuality anyway.)

274 bellisaurius April 12, 2017 at 8:57 am

This is kind of how I saw the game of chicken playing out most of the time too.

275 JWatts April 12, 2017 at 9:40 am

+1, “So it seems to me that from a game theory standpoint, United messed up, and that their behaviour created a situation that makes the redistribution Tyler mentions more likely.”

At the very least, United has taken a PR hit that will cost millions in marketing to recover from. In addition, it’s quite possible that the passenger will have grounds for a lawsuit, costing additional millions in a settlement or worse a court fight that will probably cost 10’s of millions in PR damage regardless of whether they win or lose.

And as a result of this, passengers are going to be less likely to be agreeable to being bumped and be more likely to hold out for higher offers.

276 Willitts April 12, 2017 at 10:30 am

This entire controversy is predicated on this bozo getting hurt by the police when he resisted removal. If he had not been hurt or had not resisted, this never would have made national news and United’s policies and practices would have been bullet proof.

One could argue that it wasn’t the general policies and practices that failed, but execution on the ground at the time. The scenario clearly had a maximum price that United was willing to pay to avoid a costly dispute but they didn’t come close to that price. This randomly selected customer was particularly more stubborn than average. When you’re dealing with the plane as a whole, the customers with central preferences will opt in and peripheral customers will opt out. But as soon as you draw from the group, you’re stuck with the hand you dealt yourself.

277 JWatts April 12, 2017 at 10:46 am

“This entire controversy is predicated on this bozo getting hurt by the police when he resisted removal. If he had not been hurt or had not resisted, this never would have made national news and United’s policies and practices would have been bullet proof.”

That assumes that this isn’t typical behavior for United. If so, this just becomes the inevitable result of poor customer service. If this was typical for United, then eventually someone was going to object.

Furthermore, treating someone who legally purchased and boarded a plane as if they were a trespasser / stow away is a controversial decision. People aren’t sheep and you can’t just treat the ones following the rules as if they were scofflaws, because you might have legal grounds. There’s some indications that United couldn’t legally eject a paying customer with a reserved seat in favor of an employee after boarding.

278 Willitts April 12, 2017 at 8:45 am

It seems to me that the mandatory minimum payment for involuntary bumping is the culprit here.

An optimal bidding system would involve United offering some generous compensation to volunteers, but telling the passengers if they get no volunteers, the people bumped will get a refund and nothing else.

In the meta game, this has some potential problems because airlines will compete with one another on bumping policies, and the result might not be optimal. Then there are meta meta games in law and politics, and meta meta meta games in societal breakdown and widespread murder and cannibalism.

279 bellisaurius April 12, 2017 at 8:58 am

United could of course lobby for this to be a law, and there wouldn’t be competition.

Of course, good luck with that right now…

280 JWatts April 12, 2017 at 9:46 am

“An optimal bidding system would involve United offering some generous compensation to volunteers, but telling the passengers if they get no volunteers, the people bumped will get a refund and nothing else.”

I’d avoid ever flying them again if they did that to me. Airlines are a competitive service (though not fully competitive due to the gate system.) I’ve got other choices. Stick me with bad options and I’ll choose someone that doesn’t.

The loss of even 3% of their customer base, will far exceed the cost of just making a policy of better offers at the gate.

“In the meta game, this has some potential problems because airlines will compete with one another on bumping policies,”

Exactly. The solution here is obvious. Don’t treat your customers poorly.

281 Willitts April 12, 2017 at 10:38 am

JWatts.

I’ll wager you subject yourself to many similar situations without defection. Many of our choices are subject to market power: political candidates, cable television, cell phone, postal services. In all these scenarios, you will make the choices you have, not the choices you want. If you are a particularly indignant customer, you will likely opt away from the seller who pissed you off most recently in favor of sellers with identical practices and policies who have not recently pissed you off. But other people with similar preferences will be going the other way, so you don’t hurt the company at all on net. For example, my sister left her bank when it raised fees. She was quite proud of permanently cutting off a business relationship with a firm she disliked. But the bank who raised her fees WANTED to shed deposit accounts for which they were net losers. And her new bank raised its fees too.

Your consumer sovereignty bravado is unpersuasive.

282 JWatts April 12, 2017 at 11:05 am

“If you are a particularly indignant customer, you will likely opt away from the seller who pissed you off most recently in favor of sellers with identical practices and policies who have not recently pissed you off.”

This is a pertinent decision. But it’s contingent on a company being close to the customer service median of it’s industry. The company can’t afford to routinely lose more profitable customers than it gains. Even in a growing market it will shed market share and tend towards lower ROI.

“But the bank who raised her fees WANTED to shed deposit accounts for which they were net losers.”

You analogy seems flawed in this case. There’s no evidence that United was losing money on the ticket it sold to the customer. All the evidence indicates, that United was subject to poor staffing allocation and had to rush 4 employees to Louisville on the last available plane. This would have resulted in the loss of $3,200 worth of vouchers in the best case. Of course in this case, the loss will be far, far greater.

“Your consumer sovereignty bravado is unpersuasive.”

It’s only bravado, if it’s done in a bold manner and meant to impress. Or it’s something that’s said or not acted upon. I fly on routes that routinely see a lot of competition between Delta, United and Southwest. I’ve flown on all 3 multiple times over the same areas. I’ll preference Southwest first, Delta second and United third. The majority of that decision is based upon customer service.

JD Powers backs that up with data. Southwest gets a 5 star rating, Delta gets a 4 star rating and United gets a 2 star rating. It’s noteworthy that the scale is comically 2 to 5 stars. So, in reality United gets the lowest Customer satisfaction rating.

http://www.jdpower.com/press-releases/2016-north-america-airline-satisfaction-study

I think looking at the evidence that it’s less likely that United got caught with a Black Swan event and more likely that their terrible customer service caught up with them. This is the age of cell phones with video recording. 10 years ago, there would have been no video and this would never have made national news.

283 Zach April 12, 2017 at 8:48 am

Another question is why airlines apparently offer cash incentives to clear overbooked flights or otherwise need to buy a seat when they have the authority to just refuse boarding (or de-board) without making the maximum cash offer allowed under law?

284 Slocum April 12, 2017 at 9:00 am

There’s no maximum cash offer allowed under law. There’s a maximum that they’re required to offer before being allowed to resort to involuntary bumping. There’s no law saying they can’t go above that. Why do they do it at all? Because when people accept an offer to take a later flight, they’re happy with the deal (or they wouldn’t have taken it), and the people who don’t take it are also happy to be able to stay on the flight. Since everybody wins, airlines feel free to overbook and fill flights completely. But involuntary bumping creates some very unhappy customers and terrible publicity, so under that system, airlines would have to be much more averse to overbooking. Which would mean some empty seats and higher ticket prices for everybody.

285 Zach April 12, 2017 at 9:14 am

Yes this appears to be true… lots of folks discussing this are talking about a $1350 limit which comes from here – https://www.law.cornell.edu/cfr/text/14/250.5 – but that’s actually the cap on reimbursement for involuntary bumping. So in practice that’s also the cap on voluntary bumping unless the airline decides to offer more than they’re legally obligated to which probably would’ve been a good idea in this case by needing to get folks off the plane and may or may not have had the right to involuntarily evict anyone.

286 Willitts April 12, 2017 at 10:42 am

$1350 is technically not a cap. You can file a lawsuit if your actual losses exceed that amount. Obviously you have to consider the probability of winning and your expenses if you lose. Filing in small claims court is the usual course for the few people who do this. But then that puts a different cap on damages.

The cap that mattered was the cost to United for having that other air crew not make their next flight. United should have been willing to pay up to the entire profit on that other flight. But clearly some passengers would have been willing to accept far less than that.

287 albatross April 12, 2017 at 3:51 pm

+1

288 GeorgeNYC April 13, 2017 at 6:25 pm

It is not a cap on what they are allowed to pay. Here is what it says:

Subject to the exceptions provided in § 250.6, a carrier to whom this part applies as described in § 250.2 shall pay compensation to passengers in foreign air transportation who are denied boarding involuntarily at a U.S. airport from an oversold flight as follows:
Compensation shall be 400% of the fare to the passenger’s destination or first stopover, with a maximum of $1,350….

What that means is that the airline’s obligation is capped. That is, if the ticket is worth $1,000 they only need to offer $1,350. They are free to offer whatever they want or need to offer so they are not prohibited from offering more.

289 Alexander April 12, 2017 at 8:48 am

This deliberate misapplication of market principles by an economist is up there will the silicon valley shills who say that there is a skilled employee shortage.

290 carlospln April 12, 2017 at 8:51 am

TC is a nong.

From Reddit:

“Lawyer here. This myth that passengers don’t have rights needs to go away, ASAP. You are dead wrong when saying that United legally kicked him off the plane.

First of all, it’s airline spin to call this an overbooking. The statutory provision granting them the ability to deny boarding is about “OVERSALES”, specifically defines as booking more reserved confirmed seats than there are available. This is not what happened. They did not overbook the flight; they had a fully booked flight, and not only did everyone already have a reserved confirmed seat, they were all sitting in them. The law allowing them to denying boarding in the event of an oversale does not apply.

Even if it did apply, the law is unambiguously clear that airlines have to give preference to everyone with reserved confirmed seats when choosing to involuntarily deny boarding. They have to always choose the solution that will affect the least amount of reserved confirmed seats. This rule is straightforward, and United makes very clear in their own contract of carriage that employees of their own or of other carriers may be denied boarding without compensation because they do not have reserved confirmed seats. On its face, it’s clear that what they did was illegal– they gave preference to their employees over people who had reserved confirmed seats, in violation of 14 CFR 250.2a.

Furthermore, even if you try and twist this into a legal application of 250.2a and say that United had the right to deny him boarding in the event of an overbooking; they did NOT have the right to kick him off the plane. Their contract of carriage highlights there is a complete difference in rights after you’ve boarded and sat on the plane, and Rule 21 goes over the specific scenarios where you could get kicked off. NONE of them apply here. He did absolutely nothing wrong and shouldn’t have been targeted. He’s going to leave with a hefty settlement after this fiasco” [SNIP]

Secondary markets & endowment effects: Watch the Birdie!!

No corporation is too craven for you to fly in to the rescue, eh, TC?

291 Willitts April 12, 2017 at 10:48 am

No.

Your argument is sound EXCEPT that the United employees who bumped the passengers were not deadheading. They were a working crew that needed to get to Louisville to man a flight the next day, and they had crew rest laws they had to follow.

This isn’t about giving preference to employees over customers. It was about making sure that the 100+ passengers on the NEXT flight out of Louisville got where they were going.

You are otherwise correct that this was not an overbooking situation. For the employee travel TO WORK, these four seats are essentially removed from the market and don’t count in the overbooking rules or law. United could have canceled the entire flight if it had to for business purposes.

292 Hoosier April 12, 2017 at 8:52 am

“now airline customer service will improve rather rapidly. In the long run of course that will translate into higher prices too”. Does this have to be the case? What about Southwest or any of the other airlines that don’t kick passengers off planes at the same rate as United?

This whole conversation is so depressing because it has such a zero sum game mentality to it. If the only way United can make a profit is by treating it’s customers shitty, then we have a big problem that needs to be looked at.

293 JFA April 12, 2017 at 8:53 am

I got a little fed up with the mood affiliated reasoning in this post. I say it is mood affiliated because I think Tyler is smart enough to realize that, in the face of excess demand, the airlines have final say on how long the queue is. The analogy to the concert ticket line is only marginally related to this episode. A better/more accurate way of thinking about this is that the airline provides passengers tickets to get in the line. So if the flight is overbooked, the airline doesn’t face some unlimited line of consumers who will queue just for the hope of getting paid to get out of line.

Yes, the passengers shouldn’t have been seated until the issue was worked out, but having either an on the spot ascending first-price auction or (even better) a first-price sealed bid auction (Delta has used this on some of the flights I’ve taken. If a flight is overbooked, either via email or at the ticketing booth, you enter an amount that you would be willing to accept to take another flight) is an excellent way of managing stochastic demand. It works so well because (as mentioned earlier) the airlines have final say on how many people are in the queue if there is excess demand.

Also, the dude should have gotten off the plane.

294 bellisaurius April 12, 2017 at 9:08 am

“Also, the dude should have gotten off the plane.”

This is the part I’m still wrapping my brain around. I have a duty to obey legal orders, but things get pretty fuzzy when I’m given an illegal order, and I haven’t seen anything in any of the analysis to say he was given a legal order (nor have I seen, however, what state he was in when refusing- he may have made a big enough stink to justify calling security out)

He’s almost certainly going to win a legal case (or big settlement), and united is going to get punished in public opinion and stock value, but there aren’t a lot of scenarios where I’m going to lay my ass on the line with a cop to save 24 hours. Better he did it for society and norms, I suspect, but as an individual.. well, it takes a certain kind of person.

295 Willitts April 12, 2017 at 11:02 am

Of course it was a legal order. Your obligation to obey police is not contingent on the legality of United’s decision. You obey the police and sue United later.

In most jurisdictions, resisting arrest/assaulting an officer is a crime regardless of whether the policeman is correctly enforcing the law. However, the fact a law was illegal is often sufficient in a judges eye to dismiss the charges.

Many people cite John Bad Elk v. U.S. and other cases such as Plummer v. State but those are no longer considered good law. Some states expressly enable citizens to resist unlawful arrest while others expressly forbid it. Even in Bad Elk, the murder charges were only reduced to manslaughter, not eliminated (although the prosecutor might drop the case if he believed he couldn’t prove manslaughter).

My general advice is that you disobey laws and orders at your own peril.

296 Willitts April 12, 2017 at 11:06 am

More specifically, there is Illinois law:

People v. Jones, 2015 IL App (2d) 130387 (03/17/2015)

297 JThomas April 12, 2017 at 11:24 am

If this was resisting arrest, why isn’t the Dr being charged? What was the Dr being charged with while he was “resisting arrest”? Why did the enforcement agency state that protocols weren’t followed? I agree disobey a LEO at your own peril but your analysis does not fit the facts

298 Daniel Weber April 12, 2017 at 12:56 pm

We don’t know if the Dr is being charged. There is still time. Also, prosectors may be afraid of the mob.

Refusing to get off the plane that wasn’t his is resisting a lawful order. If you want to argue that he had a right to the seat, great, but you do not argue that with the cop. Even BlackLivesMatter has not proposed something like “cops cannot arrest or remove a trespasser without listening to see if the suspect is making a really good argument.”

299 albatross April 12, 2017 at 3:53 pm

Charging the doctor here would probably be massively unpopular, which is why I’d be very surprised to see it happen. It would also be pointless and vindictive, but there’s plenty of pointless and vindictive in the world, so that’s not a reason it won’t happen.

300 JThomas! April 12, 2017 at 11:45 pm

You can’t argue with a PO?? You can’t explain the situation to them?? You are quite the bootlicker. It is quite clear the Dr. did NOTHING WRONG in this case and was pleading his case to them. He would have had $800 in funny money, without hotel accommodations, and arrived at his destination 24 hours later. UA would not have paid the legally required amount. Instead, he is now a multi-millionaire. Good for him.

And I’ve never said a PO cannot arrest someone who they believe to be breaking the law without having listened to the argument. But the subject may disobey such orders and I acknowledge will in all likelihood be arrested. This happens all the time with protesters. Why is it such a big deal in this instance? If a PO asked someone to let him into your house without a warrant, does that person have to do it? Do they have to “not argue with the cop” as you put it? Some people may decide to litigate afterwards and some may resist at that moment. I make no judgement as to what one should do even while again, acknowledging, bodily harm may come to someone who resists.

And the odds of him being charged are precisely 0% – http://fox8.com/2017/04/12/two-more-airport-police-officers-suspended-over-united-airlines-dragging-incident/

301 bellisaurius April 12, 2017 at 11:38 am

I don’t think it’s that cut and dry. If an officer ordered me to perform a sexual act, or jump off a roof, I think I would be perfectly in my rights to say no.

If they ordered me to let them inspect my house without a warrant or some sort of exigent circumstance, I’m within my rights again to tell them to pack sand (and they of course have ways of getting permission in a hurry if the circumstances require)

I don’t disagree that there’s a point where an order isn’t so obviously illegal that I should obey it and sue later, but this one seems closer to the line then some other examples.

302 Ricardo April 12, 2017 at 1:43 pm

Basically, if police order you to leave a certain area other than your home — especially a highly regulated area like an airplane, airport, government facility that says “authorized personnel only!”, a public space where a riot breaks out, etc. — or if they order you to stay put for a few minutes while they ask for your ID and/or frisk you for weapons (e.g. a Terry stop), obey first and complain later. If you are so convinced you know the law better than they do, you can certainly try not obeying but keep in mind that things may escalate very quickly and you could find yourself under arrest. You can and should exercise your First Amendment rights to complain of any potentially illegal treatment after the fact.

303 Slocum April 12, 2017 at 9:43 am

“So if the flight is overbooked, the airline doesn’t face some unlimited line of consumers who will queue just for the hope of getting paid to get out of line.”

A non-problem. You can’t ‘get in the line’ without already having bought a ticket. And the max line length is controlled by the airline (they’ll sell only so many tickets for a flight).

“I got a little fed up with the mood affiliated reasoning in this post.”

I don’t think it’s mood affiliation. I think it’s the standard problem with well-known experts. They feel compelled to justify their status by trying to give subtle, complex, non-obvious answers even when the best answers are the most straightforward ones. This is the reason experts are often so bad at prediction — they can’t make the obvious prediction even when the obvious prediction has the highest probability of being correct.

304 Zach April 12, 2017 at 10:02 am

“Also, the dude should have gotten off the plane.”

Dude made himself millions; smaller rewards for everyone else on the plane who decides to sue. He did exactly the right thing.

And, on top of that, he still gets the $1350 for being involuntarily kicked off the flight…

305 Willitts April 12, 2017 at 11:09 am

It is doubtful he will win anything apart from possibly settlement.

He resisted arrest/detention, causing his own wounds. The jury would be instructed that he had no right to resist even if the authority upon which they removed him was illegal.

United might cave under PR concerns and settle quietly.

306 Zach April 12, 2017 at 11:22 am

The Chicago Department of Aviation’s statement* was quite the opposite of the usual reflexive defense of officer conduct: “The incident on United flight 3411 was not in accordance with our standard operating procedure and the actions of the aviation security officer are obviously not condoned by the Department.”

*Someone inside the Chicago PD, which is a separate organization, stupidly and laughably released a statement early defending what happened based apparently on nothing other than rumor and watching the same YouTube video as everyone else…

307 Daniel Weber April 12, 2017 at 12:58 pm

It does seem like a violation of procedure that two cops cannot remove a 69 year old man from his seat without breaking his face open.

Police departments have rules for this, but it seems cops ignore them.

308 Willitts April 12, 2017 at 2:22 pm

And notice they don’t say which policies were violated and how. High ranking police positions are political.

“Approach and repeat the ultimatum in an even firmer tone of voice. Add the words, ‘or else.'”

https://youtu.be/9bOQitInC84

309 Daniel Weber April 12, 2017 at 2:40 pm

Did they formally place him under arrest? Failing to do that might be the biggest goof up, because it’s so easy and might have gotten the point across.

310 G April 12, 2017 at 9:02 am

I think I agree with many people here who discuss that what Tyler is missing is that the customer has already bought the seat.

Because the customers have already bought the seat, in order for the airline to maximize efficiency, it should buy seats back from the people who value them the least. The simplest way to do this would be a second price multi-unit auction. For some reason nobody runs things like that. Anything other than this causes huge welfare losses.
Part of the problem here does stem from timing. If united was able to forecast the overbooking a day in advance, many people would have taken less money to take a different (earlier) flight. However, people grow inelastic up to the time of the flight.

I think its important to note that these auctions would potentially be somewhat painful for companies some of the time. This would reduce the incentive for airlines to overbook quite as much — dramatically improving customer welfare by reducing the problems in the system.

311 bellisaurius April 12, 2017 at 9:12 am

social norms can limit what you do economically. Economically, it was better to get the 4 employees on that plane by far. Socially, saying they take precedence over you after you’ve been seated seems like a stretch.

312 JWatts April 12, 2017 at 9:54 am

” Economically, it was better to get the 4 employees on that plane by far.”

Not in this case. And maybe not in general if it turns into a reputation for bad customer service.

313 Willitts April 12, 2017 at 11:17 am

Only because of a fringe passenger. United probably made this same decision thousands of times without incident. United subjected itself to the roll of the dice by playing individual customers (computer bumping) rather than the plane as a whole (auction increasing rewards to identify preferences). In this case they lost big from a Black Swan event. However I think a change in policy will not only prevent it from happening again but cure the PR problem.

If United caves, all airlines will lose because now many passengers will resist involuntary bumping. They should consider countersuing this guy.

314 Willitts April 12, 2017 at 11:11 am

Technically they did not “buy the seat” under the law. They bought the right to be seated at United’s convenience. This appears to be the main source of discomfort with people. The airline seat is not a hamburger that you own once it is paid for. The seat is retained by United to do as it pleases.

315 JThomas April 12, 2017 at 11:32 am

It is very telling you aren’t willing to discuss laws, regs, or the actual contract. Put up or STFU.

316 Willitts April 12, 2017 at 2:12 pm

I discussed the laws, regs and contract of carriage at length elsewhere in this post.

Read up or shut up.

317 derek April 12, 2017 at 9:16 am

I’m amazed at the comments here.

A hint. If your stunningly efficient system requires that you beat the piss out of a customer for not having adequate appreciation of it’s grandeur, a moderately efficient market would punish you with non existence.

This is akin to Nordstrom after you went through the checkout and paid for the pot stopped you at the door and said the assistant manager needs that pot because, and beat you up if you didn’t hand it over willingly.

I would like to see whether there is a correlation between the acceptance of what United did and level of education.

318 JWatts April 12, 2017 at 9:56 am

“This is akin to Nordstrom after you went through the checkout and paid for the pot stopped you at the door and said the assistant manager needs that pot because, and beat you up if you didn’t hand it over willingly.”

+1, the pot on sale analogy wasn’t really close.

319 peri April 12, 2017 at 10:44 am

Well and simply-stated by you and a few others here.

And to all the posters blinding us with economic science and still more complex auctions and incentives, you need to exert some effort to make sure the average person never perceives any of what’s going on behind the curtain.

320 Willitts April 12, 2017 at 11:24 am

Terrible analogy. Airline seats are part of a club good while a pot is a private good. The airline is not selling a seat. It retains that seat. You are making an offer to travel on that seat for the duration of the flight.

To use a better analogy, if you owned an apartment building and signed a lease with a future renter, the law allows you to break the lease for any number of business reasons such as housing your own family as necessary. This is particularly true if the law allows the landlord to put such a clause into the lease, upon which the renter is informed and accepted the unilateral offer.

Of course government can write laws and rules that apportion property/use rights differently, but those laws will have consequences. In general, fares will go up, more flights will be canceled, and entire routes could disappear. Airlines run on paper thin margins. Overbooking and transporting employees to work are two tools of staying profitable.

321 OldCurmudgeon April 12, 2017 at 12:06 pm

There is the idea of efficient breach, but you still need to make the other party whole. And, given that nobody on the flight accepted UA’s offer, those damages are obviously much higher.

I’ll also add that we’ve treated common carriers like UA differently than for hundreds of years. It’s dangerous to make analogies.

322 Willitts April 12, 2017 at 2:16 pm

This market is different than other markets, but so is the nature of the good. There are obvious reasons why an airline must maintain good order and discipline among passengers.

323 FE April 12, 2017 at 9:33 am

I can’t tell from his phrasing whether Gary Leff realizes that the DOT regulations set minimum, not maximum, reimbursement. The regulations say you get X times your fare (depending how long you are delayed), subject to a cap. But they don’t prohibit the airline from offering more than the cap. Certainly, the cap helps set the bargaining expectations (“this is all we’re legally required to offer you, so take it before we call the cops”), and United probably instructs its agents not to exceed it, but it is not a price control.

324 Willitts April 12, 2017 at 11:27 am

You are correct. I don’t know if United has restricted the amount the gate can offer for a booked. If they don’t, they could possibly enable bribery and other frauds.

United should have been willing to pay up to its cost of the air crew not making its departure point.

325 Gary Leff April 12, 2017 at 12:25 pm

DOT rules set the maximum legal liability, in this case 4 times the one-way fare not to exceed $1350 (which United reported was $1000).

Airlines generally adopt DOT guidelines, they don’t offer voluntary compensation in excess of what DOT requires them to pay (i.e. they don’t offer more for voluntary bumps than they can get away involuntarily bumping someone for).

Worth quibbling with DOT rules, and limits on the ability to sue an airline for anything more than direct breach of their own contract of carriage (Airline Deregulation Act pre-empts most state laws, and explicitly in Northwest v Ginsberg was held to pre-empty state contract duties of good faith and fair dealing).

In hindisght United wishes no doubt they’d have paid a LOT more to make this go away. $800 travel credit plus a hotel night usually gets a substantial oversubscription of volunteers, this is more than airlines usually offer. The gate agent wouldn’t have been authorized to do more.

Airlines including United have gotten better at involuntary denied boardings, down 75% since deregulation, and down even in recent years as planes have gone out more full. This incident happened because a whole lot of very rare situations happened together — operational mess necessitating replacement crew (with no alternate flights available for the crew), passengers unwilling to take the above average compensation offered, passenger refusing to get off when asked, police reacting with force when called.

So the usual processes broke down, United is already saying they’ll do some things differently — I’ve written that a key issue is how post-9/11 customer service issues quickly become law enforcement issues in air travel, and United says in a situation like this they won’t start off calling the cops. That’s a start.

At some price passengers would have been willing to give up their seats. At some cost United would have just said “screw the flight we want to operate out of Louisville it’s no longer worth it for us to send crew.” With perfect foresight the easiest thing would have been to screw over the passengers on THAT flight, cancel it, and delay or cancel the subsequent flights that aircraft was supposed to operate. No one would have heard about this incident at all, even though many more customers would have been hurt.

326 byomtov April 12, 2017 at 1:52 pm

With perfect foresight the easiest thing would have been to screw over the passengers on THAT flight, cancel it, and delay or cancel the subsequent flights that aircraft was supposed to operate. No one would have heard about this incident at all, even though many more customers would have been hurt.

No. With “perfect foresight,” or just common sense, the easiest thing to do would have been to raise the offer.

OK. The gate agent or attendant can’t do that, ordinarily. What about a phone call explaining the situation and asking for authority to go higher? It shouldn’t take a genius to figure out that that was a good idea.

When the airline looks at a plan for some contingency, and somewhere it says,

“Under conditions A,B,C we forcibly remove a paid passenger who is not misbehaving in any way from a normal flight ,” it might want to reconsider its plan. Not hard.

327 caseynshan April 12, 2017 at 9:53 am

They did NOT offer $800!
They offered an $800 voucher. I would guess at least 25%-50% of those go unused or results in a steal from another airline and is much more likely to be used on high profit seats.. However the $1350 is CASH.. so is much more costly.. they could have easily gone up to $1500-$2000.

If I’m based out of Atlanta, Dallas etc.. United Voucher is worth much less than cash as I like direct flights. Maybe I already have a bunch of SW points etc..

328 OldCurmudgeon April 12, 2017 at 12:10 pm

I’d also like to know whether the voucher had any restrictions (e.g., blackout dates and/or could only be used on a limited number of available seats) ala frequent flier points

329 collin April 12, 2017 at 1:15 pm

Yes, I am amazed how many analyst forget it is $800 (or $500 or $1,350) voucher not cash that is not offered. Considering the travelers that are on the ‘volunteer’ list tend not to travel a lot. So the value of the voucher is extremely small to cash. I have not purchased a plane ticket for personal travel in 10 years so the value of a $500 or $800 or $1,350 is worth nothing to me. (However I travel next summer so I may personally volunteer for vouchers in six months.)

Tyler, you did not game theory out the difference of $800 voucher versus $800 cash! I bet $800 cash gets a volunteer.

330 Hazel Meade April 12, 2017 at 10:01 am

Alternate solution: Bumpable fare classes.
You could have a certain number of “guarenteed boarding” tickets (maybe 60% of the seating capacity) at a higher price, and a smaller number of “not guarenteed boarding” at a lower price, with all the compensations of vouchers to be offered etc. if you don’t get to board. Or even just ad a $100 fee if you want a guarentee that you won’t be bumped, with limited availability based on the number of seats.
Then if someone gets bumped, it becomes much more fair to say “Well if you really 100% had to get on the plane, you should have paid extra for guarenteed boarding”. By not purchasing the guarentee you’re essentially acknowledging that boarding the plane isn’t a 100% necessity. You’re willing to take your chances.

331 Willitts April 12, 2017 at 11:28 am

United has government fares exactly for this purpose.

332 Nils Franco April 12, 2017 at 1:58 pm

As a college student in no particular hurry to get home to see my folks (but wanting nonetheless to see them, and to see them cheaply), this idea appeals greatly to me.

333 other derek April 12, 2017 at 10:04 am

I didn’t really follow View’s argument. Sure, $1350/400% is the maximum required, but there was nothing preventing United from going above this, and United sure didn’t even begin to approach this maximum in its initial offers. I would guess that several passengers on the plane would have jumped at $1350 cash, or even $500 cash, in exchange for being delayed by a day. View misses the mark here, imo.

334 mulp April 12, 2017 at 12:11 pm

The fare was $100. $400 was offered. That is the required offer for more than 4 hours. Then some were offered $800 according to reports. That is twice the required compensation. Maybe one of the three bumped who got off was offered/got $800.

The $400 offer was for volunteering to be bumped. Offering $500 to volunteer when a forced bump will pay only $400 by law is interesting. Take $500 to get off now, or risk being removed annd getting only $400.

335 other derek April 12, 2017 at 1:33 pm

Nope, United only offered $400 in vouchers. I sure don’t value a United voucher the same as cash. I’m sure they could have gotten some takers with $400 cash, too.

336 Daniel Weber April 12, 2017 at 1:01 pm

Other airlines go over this threshold. They don’t have to do it legally, but it’s good customer service.

337 Jonathan Tappan April 12, 2017 at 10:04 am

Only in the amoral world of post-Coasean economics would anyone think to compare these two situations and declare them equivalent:
1) Person A has lined up to buy a blue pot, only to have the store run out.
2) Person B has purchased the pot, forked over the money and has it in his hands, only to be told that he must relinquish it under threat of violence so that it may be given to a higher-status individual.

338 byomtov April 12, 2017 at 1:44 pm

Not so much amoral as trying so hard to be contrarian as to look silly.

339 Enrique Guerra-Pujol April 13, 2017 at 5:37 pm

The problem here is not Coasian morality, the problem is the lack of Coasian bargaining! https://priorprobability.com/2017/04/13/simple-rules-for-a-complex-world-united-airlines-edition/

340 Dave April 12, 2017 at 10:17 am

“Second, given that the stock of United tanked after the incident”

No, it really didn’t (or at least hasn’t so far). It was down a few percent Tuesday morning (the linked Tweet) but then recovered to be down 1.1% on the day. To put it in perspective, United stock closed Tuesday at $70.71. It closed last Friday at $70.88 and last Thursday at $70.22. So as of Tuesday’s close, United stock is trading where it traded last week.

341 Willitts April 12, 2017 at 11:29 am

Dumb money.

342 peri April 12, 2017 at 10:21 am

So, I know there are no stupid questions, but here’s a dumb question, from a non-flier for whom this really is like reading about who to move where in the 19th inning of a baseball game:

Are the premiums for refundable tickets really so important to the airlines? Is the selling of only non-refundable tickets, resulting in a less-full plane, with some paid-for-but-unoccupied seats, a total non-starter? Would it cause people not to buy airplane tickets? Would business travelers take Megabus or Amtrak?

343 peri April 12, 2017 at 10:28 am

And I do grasp that the “algorithm” worked with respect to the passengers, just not the crew. But the non-refundable-ticket scenario leaves more potential room for seats for crew as well.

344 Hazel Meade April 12, 2017 at 10:46 am

I don’t think refundability solves anything. if you’ve made travel plans and showed up at the airport, you’ve already been inconvenienced well beyond the cost of the ticket. You most likely need to get somewhere which means you’re still getting on a later flight, no matter what. The vouchers are there to compensate you for the inconvenience of having to wait until the next day or for the next flight.

345 peri April 12, 2017 at 11:38 am

I don’t think it does, either, but maybe I didn’t understand what you’re saying. I am proposing eliminating the refundability. Do airlines go bust without selling refundable tickets? They seem to cause an awful lot of trouble, versus selling seats on a plane, whether anyone sits in them or not.

346 Hazel Meade April 12, 2017 at 11:41 am

I was under the impression that tickets were already NOT refundable.

347 peri April 12, 2017 at 11:53 am

Oh, I had the opposite impression: that the ability to change your ticket (for a premium) up to close to the time of the flight, was the reason the airlines overbooked in the first place.

Airline travel is a black box to me, not having flown in a quarter-century. Now if the subject is returning pots, there I would be an expert. My husband and I walked in to Target the other day because it sells the Arm & Hammer corn-based cat litter. I said: “I don’t really like this store. In fact, I hardly ever come here except to return things.” He commented that it didn’t seem possible that I come there to return things more often than to shop, but he hasn’t thought it through.

348 Hazel Meade April 12, 2017 at 12:33 pm

Well, you can usually change your flight (for a fee), but you can’t get the money refunded. You also can’t turn it in for airline credit. You HAVE to book another flight with the same airline.

349 peri April 12, 2017 at 12:56 pm

Oh.

Well, I guess I am proposing that you not be given credit; that you take the flight you paid for, or if your change of plans is so important to you, demonstrate that by eating the cost of the unused seat and buying a new one. There will be more leg room for your fellow passengers and the airline still sold the blessed seat.

You paid your premium and absolutely nobody else was involved.

Help me understand why the airlines need to complicate scheduling by offering to credit fares.

350 peri April 12, 2017 at 12:58 pm

Sorry, not “credit” in your sense that you must immediately re-book ….

351 Hazel Meade April 12, 2017 at 2:17 pm

That would probably cause a worse problem because you would end up with more pissed off customers, and more empty seats due to unused tickets, and thus more overbooking and more uncertainty for other travellers. Allowing people to change flights means that they free up a known seat. Otherwise people will just randomly not show up and you won’t know it until it’s time to board.

352 peri April 12, 2017 at 2:45 pm

Well, I think that’s the way it used to be …

The airline had their money either way; they could sell the no-show’s empty seat a second time at the last moment to someone standing there at the gate hoping to leave.

Ah, I just remembered – no one is allowed to stand hopefully at the gate anymore, hoping to get on.

I hope everyone is enjoying all this convenience, at least.

353 Careless April 12, 2017 at 4:16 pm

Well, you can usually change your flight (for a fee), but you can’t get the money refunded.

You are wrong.

354 Careless April 12, 2017 at 4:15 pm

You’ve got it backwards, of course. Refundability is a benefit for the flier, not the airline. It has nothing to do with what happened here, except for the fact that if you eliminate overselling, airlines will eliminate refundable tickets (unless there’s a large premium paid)

355 NYC Analyst April 12, 2017 at 10:24 am

Did the passenger (Dr. Dao) commit a crime? If he did, why didn’t the police arrest and charge him?
If Dr. Dao did not commit a crime, why was he assaulted by the police?
Police are supposed to enforce the law by arresting those that break it, what is the rationale behind roughing up a passenger and then leaving him be? Is this the new way police operate – just beat people and leave them, no charges, no arrests?

356 Willitts April 12, 2017 at 11:33 am

He wasn’t assaulted by police. They had the lawful authority to detain and remove him, and he resisted. They have the lawful authority to use as much force as reasonable to remove him. There is a legal question as to whether they used appropriate force, but I assure you they came nowhere close to breaking the law unless there was a jab I didn’t see on camera yet. This of course matters only in the perception of expected jurors or judges. Lawyers can and will spin it any way they can, but I wouldn’t have charged the officers with a crime from available evidence.

357 prior_test2 April 12, 2017 at 1:11 pm

‘He wasn’t assaulted by police. ‘

Of course not – as the police initially reported, he fell against an armrest. Seriously, who are you going to believe, the police or a lying video?

358 Ricardo April 12, 2017 at 1:09 pm

In reality, the police are not going to litigate federal regulations in the heat of the moment. From their perspective, the captain and representatives from the airline called them over to remove a passenger, so they say, “Come on, sir, let’s go, the airline will put you on another flight” and, if the passenger refuses, the police invoke their power to use force to control who gets to be in a certain regulated public or private space. Disobeying police orders unless you are in your own home is generally not a wise move, even if you are convinced you are in the right. If the airline violated federal regulations or its contract with the passenger by having him removed, they might have to provide compensation to the passenger but there is an open question whether that compensation would be more than the $800-$1,350 figures that have been mentioned. If the police used excessive force, that is a separate issue.

359 Willitts April 12, 2017 at 3:03 pm

You are correct here. The police have no power to enforce federal regulations. They only have the power to enforce United’s property rights.

Legally there are two entirely separate issues here: 1) whether it was lawful for United to involuntarily bump him, and 2) whether the police used excessive force. It could be either, neither, or both. I’m not sure whether he is suing the police under federal or state law.

360 Josh April 12, 2017 at 10:37 am

I think another problem with unlimited raising of compensation until someone agrees to be rebooked is that passengers can hold out even above their reserve price in order to get more money if the airline needs to rebook more than one person. This is because the passengers can see the other bids and everyone can refuse to accept until the number of passengers to be rebooked is 2 or less. In fact, I was on an overbooked flight, and someone offered to be rebooked but was unsatisfied with the alternative flights, and said they would wait until the reimbursement went up, until the agent told them that the airline was already offering the maximum amount. I guess concealed bids would be better, but that is hard to implement. So it does make sense to have a maximum the airline is willing to offer.

361 Hazel Meade April 12, 2017 at 10:52 am

Right. There is no way the airline can just keep raising the offer until someone takes it, because passengers will quickly learn to collude to get the airline to jack up the offer. Given the fact that the flight departure is a time-critical issue, it becomes a highly price inelastic situation for the airline. there might be passengers willing to break and take the offer but they just have to wait a matter of minutes for a better offer. So offers would have to skyrocket very quickly, and significant flight delays might result if the airlines DIDN’T raise the offer fast enough. You’d end up with a crowd of passengers stonewalling for half an hour until the offers got jacked up to $3000 a head or whatever.

362 byomtov April 12, 2017 at 11:07 am

Right. A couple of hundred passengers are going to form an instant coalition to extort the airline.

No defectors.

That looks impossible to me.

363 Hazel Meade April 12, 2017 at 11:24 am

Not all of the passengers are willing to be take the offer. Most of them want to get on the plane and get home. You’re actually talking about maybe a dozen people who *might* take the offer. And all they have to do is keep their mouth shut for a few minutes and wait to see if the airline raises it. Since the airline needs the flight to depart at a fixed time, if the airline has no other options the price will skyrocket at the very end. The possibility of getting a *very* high offer in the last minute (only a few minutes from now), would be enough to make many passengers take the risk. It would be like winning the lottery. Do you take the $400 dollar voucher now, or wait 20 minutes and have a chance of getting $3000 cash?

364 JWatts April 12, 2017 at 11:42 am

“And all they have to do is keep their mouth shut for a few minutes and wait to see if the airline raises it. ”

I’ve witnessed this. At some point, the people who are interested start eyeing the crowd to see if anyone else is moving towards the desks and they will themselves start moving over to get closer. As soon as one person moves, there will often be several people, who realize if they don’t take it now, then they may not get the opportunity.

And if no one takes the final offer, the airline personnel can then decide to not allow someone to board.

“and have a chance of getting $3000 cash?”

The regulations specify a maximum of $1,350 that the airline has to pay.

365 Hazel Meade April 12, 2017 at 11:51 am

Right, so I imagine that SouthWest’s costs for compensating passengers who are bumped are somewhat higher than United’s. If you have a flat offer and then you start bumping people, then there is no reason for anyone to wait to take it.

366 mulp April 12, 2017 at 12:14 pm

$1350 is the maximum that must be paid to a forced bump. But a volunteer can be offered $2000 because it’s a voluntary negotiation that is encouraged but not regulated.

367 OldCurmudgeon April 12, 2017 at 12:21 pm

Not all of the passengers are willing to be take the offer. Most of them want to get on the plane and get home. You’re actually talking about maybe a dozen people who *might* take the offer.

Everyone has a price. It just might be higher than a lousy $800 voucher.

368 Hazel Meade April 12, 2017 at 12:28 pm

Right, but people will hold out to get more than their reserve price if they know the airline has no choice but to up the offer.

369 JWatts April 12, 2017 at 12:39 pm

“Right, but people will hold out to get more than their reserve price if they know the airline has no choice but to up the offer.”

Hazel, it’s an auction. It operates pretty much like every other auction in history. Historically, people in auctions bid against each other. They don’t all sit quietly waiting for the auctioneer to offer some fantastic deal, confident that the other bidders will join in comradely solidarity.

370 Hazel Meade April 12, 2017 at 2:30 pm

Um yeah, if an auction involved one buyer and multiple sellers who weren’t really there to sell anything, and the auction pretty much consisted of that one guy yelling out bids with a half hour time constraint to get one of the reluctant sellers to relent.

Then yes, it’s just like an auction.

371 JWatts April 12, 2017 at 3:37 pm

“Um yeah, if an auction involved one buyer and multiple sellers who weren’t really there to sell anything, and the auction pretty much consisted of that one guy yelling out bids with a half hour time constraint to get one of the reluctant sellers to relent.

Then yes, it’s just like an auction.”

The seller is the airline selling a voucher in exchange for a seat on the current flight. The buyers are the fliers willing to pay with their seat. And have you ever been to a public auction? It’s routine to sell a car at a public auction in less than 5 minutes.

So, it’s not just like an auction, it explicitly is an auction.

372 JWatts April 12, 2017 at 11:35 am

I agree with byomtov here. The likelihood of collusion is small. Furthermore, competing Airlines handle it better. There’s a reason that United is at the bottom of Customer Satisfaction rankings.

Southwest, for example, will start an opening bid, well before flight boarding. Usually, 30 minutes or more. They announce the amount. If they don’t have any takers, a few minutes later, they bump it up again. This generally sorts itself out pretty rapidly.

United seems to have failed in two different ways: a) they stopped upping the bid at an $800 voucher and b) they didn’t sort this out before boarding the plane. At the very least, United has either some really bad policies or it should fire some people for implementation of the policies it has.

373 Hazel Meade April 12, 2017 at 11:45 am

This might work only because people know there is a maximum offer and then someone will be drawn at random. if you know that the the airline could NOT pick people at random and bump them, then the logical implication would be that the offer would get very high at the last minute.

374 Daniel Weber April 12, 2017 at 1:04 pm

The likelihood of collusion is small. But the likelihood that a passenger would decide to disobey the cops is also small. What if you’ve booked 20 people heading to a family reunion on a 22 person flight and need 4 seats? That’s rare, but everything about this situation is rare.

I’ve heard other airlines (Delta?) simply ask customers to submit bids to the desk in advance. Plug those into the computer, let ‘er rip.

375 byomtov April 12, 2017 at 3:39 pm

It doesn’t matter how high the offer gets if someone else claims it.

Suppose I’m willing to give up my seat for $1000, and I judge that there are ten other passengers who are willing to give up their seats for something in that vicinity. What good does it do me to reject the $1000 so someone else can get $1200? It’s not like everyone is going to get $1200. Whoever jumps first gets it.

376 GeorgeNYC April 14, 2017 at 10:11 am

My goodness one possible market imperfection that might just slightly affect your dear corporate overloads’ profits and you are all like extortion extortion!!!!!

Yes, so much easier to just allow the corporation to use force when paying money is inconvenient or might lead to some slight market unfairness against them.

You re probably the same people who make the argument that price gauging after a hurricane is just the “market.” I assume you would be totally against me just taking stuff I need using a gun. How is this any different.

Corporate shills all of you.

377 Hari Singh April 12, 2017 at 10:56 am

Are we looking at a form of price fixing? Are the airlines tacitly colluding among themselves to limit the compensation to people who are bumped, knowing that they can rely on the police to enforce the arrangement? By simply making it corporate policy to offer the minimum (in this case $800) and never allowing the people on the ground to use their discretion, the airline is effectively guaranteeing that there can be no defection from the price-fixing arrangement. If, United were to defect and pay more, would all the airlines need to pay more, and would fewer people end up being forcibly removed from flights?

People ask why United was willing to pay so high a price in bad publicity, but maybe they were balancing that against saving themselves from competition with other airlines over paying passengers who are bumped. I am starting to suspect that most airlines do the same thing (tacit collusion) and that this just blew up in United’s face, because they were more concerned with not being seen as “cheating” by the other airlines and precipitating a price war.

378 Hazel Meade April 12, 2017 at 11:08 am

As noted by Josh above, if the airlines were known for continually raising offers at the moment of departure then they would rapidly find that they would be paying the maximum offer (or more) 100% of the time, for every bumped passenger. The cost would add up to a lot, and probably not be worth it. So they set some standard offers and if nobody takes it it may be less costly to randomly pick passengers to bump. Passengers almost never resist and have to be forcibly removed.
You would have to weigh the publicity cost of forcibly removing the rare recalcitrant passenger against the cost of having to pay significantly higher compensation for every single passenger who gets bumped.

379 Thomas April 13, 2017 at 5:24 am

This goes against econ 101 and is a stunning display of anti-markey bias and ignorance. There is almost 0 chance of collusion in a non-repeating game played against people who are strangers.

380 JWatts April 12, 2017 at 12:23 pm

“Are we looking at a form of price fixing? Are the airlines tacitly colluding among themselves to limit the compensation to people who are bumped, knowing that they can rely on the police to enforce the arrangement? By simply making it corporate policy to offer the minimum (in this case $800) ”

No, because different airlines obviously handle it differently. $800 is not the minimum, as far as I know there is no minimum. And I’ve frequently seen people take a $400 voucher for a bump. Indeed, I don’t see it get as high as $800 very often.

381 Willitts April 12, 2017 at 3:07 pm

I think you mean price discrimination. That means charging different people different prices according to their individual willingness and ability to pay. Airlines do this all the time, segmenting the market between different class seats, days of travel, and time of travel. They are quite good at it.

Price fixing is when firms that are horizontally or vertically integrated collude to raise prices against consumers.

382 byomtov April 12, 2017 at 10:57 am

In any model of stochastic demand and fixed capacity in the short run, demand will sometimes be too high, and I don’t know of many retail markets that rely on price alone to ration quantity.

But the market for airline tickets does exactly that. The airlines adjust prices constantly in response to demand for various flights.

383 Ryosuke April 12, 2017 at 10:58 am

“One problem with using money to buy people out of queues is that it encourages more upfront queuing to begin with…”

Since United controls how many tickets they are going to sell for any given flight, shouldn’t this not be a problem??

384 Emilio DT April 12, 2017 at 10:58 am

I think this post (http://www.nakedcapitalism.com/2017/04/united-passenger-removal-reporting-management-fail.html) by Yves Smith renders the overbooking angle obsolete when it comes to the United debacle. United needed 4 seats for their crew but had no right to kick people out of the plane because the flight was not overbooked.
“The statutory provision granting them the ability to deny boarding is about “OVERSALES”, specifically defines as booking more reserved confirmed seats than there are available. This is not what happened. They did not overbook the flight; they had a fully booked flight, and not only did everyone already have a reserved confirmed seat, they were all sitting in them. The law allowing them to denying boarding in the event of an oversale does not apply”. Leave Dr. Dude alone

385 Harrkar April 12, 2017 at 10:59 am

Shouldn’t the article start with this sentence ‘United (possibly) should have known earlier it needed to transport the employees, and a bunch of other things’. The game theory starts at the wrong end. .

386 byomtov April 12, 2017 at 11:04 am

Yes.

387 Willitts April 12, 2017 at 11:39 am

Too many unanswered questions to speculate. There could have been awareness, communication , and planning problems. For example, a flight crew could have been unexpectedly delayed, canceled or rerouted. It takes time for this to be reported. Then a resource allocation decision has to be made. A new flight crew has to be selected and accepted according to policies, the collective bargaining agreement, law, and crew rest. Then they’d have to find the best flight to get them there when they show up, if they show up. Flight crews face many of the same travel disturbances as the rest of us.

I’m disturbed at how many people think that this was an easy planning problem for United.

388 OldCurmudgeon April 12, 2017 at 12:28 pm

Has United asserted that anything like that actually happened? I see no reason assume those facts. UA is perfectly capable of holding a press conference or posting an open letter on their web page.

389 Willitts April 12, 2017 at 3:11 pm

United did say they were transporting a crew to their origin. It’s likely they don’t know yet what the malfunction was. They have to investigate, and the guilty or incompetent parties won’t be cooperative.

I’m not assuming these facts. I’m only describing how easily this could happen. To the contrary, it is assuming a lot to claim that UA was negligent in planning its resources. It is quite amazing they balance it as well as they do.

We might see a report from UA. Or we might not.

390 byomtov April 12, 2017 at 1:42 pm

OK. It was hard planning problem.

How would you have solved it?

391 OldCurmudgeon April 12, 2017 at 2:44 pm

Nobody can answer that unless UA explains what happened. For all we know, UA bumped this guy because it was $50 cheaper than some alternative method of achieving their goal.

Given UA hasn’t asserted any mitigating factors, I’m inclined to believe there aren’t any.

392 Willitts April 12, 2017 at 3:16 pm

Old Curmudgeon is correct. We don’t have nearly enough information.

It’s also possible there was no “solution.” It is easy for us, sitting at our computers, to speculate about the cause and the correction. It’s quite another to actually do it. Airlines have contingency plans, but plans usually fall prey to uncertainty.

I think it’s safe to say that raising the reward for voluntarily surrendering a seat is an “easy” answer, but allowing gate personnel to run auctions with no ceiling or oversight is fraught with moral hazard. Call it a delegation problem.

393 Art Deco April 12, 2017 at 3:50 pm

They were in a dilemma because of their planning glitches, not because they made an incorrect actuarial assessment of the number of passengers who would show for the flight. They were faced with the task of finding alternative transportation for the 4 crew or yanking people off the flight, which is a qualitatively different act than refusing to board people who arrived late at the gate. If you had a rule that you needed authorization from higher management to yank people off a flight, the discretion to authorize such could be combined with the discretion to authorize an auction. You could even pipe in the voice of the manager himself to run the auction.

394 byomtov April 12, 2017 at 11:03 am

I agree the man should have left the plane in the first place,…

No. He shouldn’t.

Look. United screwed up by not planning their crew assignments better. They needed the seats to avoid cancelling a different flight. That would have cost them some large amount of money, certainly a substantial multiple of $800. So why not go up on the offer. If they offered $8000 they likely would have been swamped with volunteers to give up their seats, and still saved a lot. There is your market solution, as opposed to the corporate one.

395 Thiago Ribeiro April 12, 2017 at 11:10 am

+1

396 Hazel Meade April 12, 2017 at 11:11 am

If they did that, then every time a flight was overbooked the passengers would stonewall to get higher offers. Everyone would know that the airline needs the flight to depart on time. They just have to wait until the last second to see how high the airline will go.

397 Art Deco April 12, 2017 at 11:16 am

Again, dragging people off a flight is quite unusual. As a rule, people on overbooked flights are simply denied boarding and compensated according to law.

398 Hazel Meade April 12, 2017 at 11:28 am

It is unusual, but I have seen it happen. Usually the person who is bumped leaves voluntarily. Causing an altercation on an airplane is generally very poorly regarded by other passengers.

I think in this situation, the fact that the guy was a doctor who had patients to see garnered him more sympathy than he otherwise would have. Doctors are revered. If he was a banker or a lawyer he would get no sympathy.

399 Art Deco April 12, 2017 at 5:11 pm

Doctors were revered in 1970. That was then, this is now. (There is also some indication that he’s a doctor whose been slapped with criminal charges, though others are contending that’s mistaken identity).

400 byomtov April 12, 2017 at 1:40 pm

No they wouldn’t.

There are hundreds of passengers waiting. It only takes one or a few defectors to break the coalition.

If I’m willing to give up my seat for $400, why should I hold out so someone else can get $800?

401 Hazel Meade April 12, 2017 at 2:37 pm

because you know the offer will get much, much higher if you wait a few minutes. And you might still be the first person to claim it. Given that it’s a price-inelastic situation, the potential future reward might be worth giving up the smaller known reward in the present. Ever bought a house? If you know the seller is desperate, you may hold out for longer to get a lower price. Depending on market conditions etc. The closer you are to the departure the more desperate the airline will get.

402 Careless April 12, 2017 at 4:35 pm

because you know the offer will get much, much higher if you wait a few minutes

And then someone else will take it. You’re really bad at this, Hazel.

403 Alexander April 12, 2017 at 9:58 pm

“If they did that, then every time a flight was overbooked the passengers would stonewall to get higher offers. Everyone would know that the airline needs the flight to depart on time. They just have to wait until the last second to see how high the airline will go.”

Which is why Dutch Auctions have never once been used in the history of mankind.

404 Willitts April 12, 2017 at 11:39 am

You have obviously never had to allocate resources on the scale of a major American airline.

405 byomtov April 12, 2017 at 1:37 pm

You are right. I haven’t. If I had I would have had a better way to deal with this in place.

Are you suggesting $8000 would not have done the trick?

Are you saying there was no other way to get the crew to Louisville, including maybe a flight on a different airline?

Are you saying United sold no seats after they became aware of the need to move the crew?

Finally, are you saying it is unreasonable to expect a major airline to have better contingency plans fro this kind of situation than, “Just pick someone and physically throw them off if necessary?”

Yes. United had a problem. Their solution stunk.

406 Willitts April 12, 2017 at 3:24 pm

Again we are arguing past one another. You seem to take issue with their business decision, and apply it to your assessment of whether it was legal for them to do. These are not the same thing.

I’m merely saying UA legally did what they did. I didn’t say it was smart.

Perhaps they could have and should have done everything you suggest. I only suggest to you that that is not quite so easy to implement.

Would any airline really give authority to a flight attendant to hand over $8000? Do you not see the potential for bribing the flight attendant? Would any airline give captains unrestricted ability to hire an $8000 taxi? Would that taxi ride satisfy their crew rest needs?

They wouldn’t have had to “throw someone off” if someone had done what he was told. It’s UAL property. They can grant permission to use, and then take it back…as long as its not at 35,000 feet when they rescind.

407 byomtov April 12, 2017 at 3:45 pm

I did not intend to make any sort of claim about the legalities, only about the (lack of) intelligence in the process.

I am willing to bet that United has all sorts of procedures in place for handling unusual occurrences, including this one. That the procedure was this bad is crazy.

408 Willitts April 12, 2017 at 3:49 pm

I apologize if I thought you made arguments you didn’t. The internet is noisy about this issue. That’s my poor excuse and I’m sticking with it.

409 Cornfour April 12, 2017 at 11:06 am

Tyler Cowen: “The bumping of the doctor has been a huge event on Chinese social media, and how many of those Chinese are thinking that the doctor was bumped because he was Chinese.”

Just to clarify, the passenger was almost certainly an American citizen, who originally came from Vietnam. Chinese social media love to gin up anti-American outrage, so they look at this as an opportunity too good to resist. They will always find something. United Airlines can’t control that. This is a minor point, but not irrelevant.

410 Art Deco April 12, 2017 at 11:19 am

If John Derbyshire has assessed the situation correctly, the capacity of Chinese to conceptualize themselves as politically aggrieved or socially aggrieved is astonishingly robust. The amount of dry tinder for a revanchist lallapalooza should leave us all perturbed.

411 Hazel Meade April 12, 2017 at 11:32 am

Well that should have been obvious from the whole situation with their fighter pilot hitting a US spy plane some years ago.

You have some cocky Chinese douche thinking he’s all Top Gun and shit flying right off the wing tip of the US airplane (which was in international airspace), and the idiot manages to clip the wing and get himself killed. The US airplane is damaged and has to request an emergency landing at a Chinese airport. And what happens ? The Chinese demand that WE apologize to THEM, because our airplane violated their airspace when it had to make an emergency landing!

This is like like demanding an apology when your neighbor asks to use your phone to call an ambulance because your son accidentally shot him while playing cowboy with a pistol.

412 Willitts April 12, 2017 at 11:40 am

Isn’t he Vietnamese?

413 Hazel Meade April 12, 2017 at 11:46 am

Yes, that’s the point. The Chinese will find a reason to be aggrieved even when the person involved isn’t even Chinese.

414 msgkings April 12, 2017 at 12:14 pm

Maybe all Asians look alike to them.

415 Careless April 12, 2017 at 4:38 pm

Just to clarify, the passenger was almost certainly an American citizen, who originally came from Vietnam

Come on, you don’t have the memory of a goldfish

416 Cornflour April 13, 2017 at 10:07 am

True or not, I don’t understand how it’s pertinent.

417 Bill April 12, 2017 at 11:19 am

The solution is simple.

Allow price discrimination to work: have several classes of reservation: 1) semi-confirmed; 2) confirmed but subject to … and 3) confirmed confirmed.

418 y81 April 12, 2017 at 2:46 pm

Full-price non-refundable tickets are as a practical matter never the ones selected for “re-accommodation,” so de facto that is the system we have.

419 Bill April 12, 2017 at 6:45 pm

Actually, no. Non-refundable operates on the buy side, i.e., discount where the cost falls on the customer if the customer doesn’t show.

420 JWR April 12, 2017 at 11:32 am

Examples used are not on point. Rather than waiting in line for concert tickets that run out it would be like buying the ticket, going into arena, sitting down down waiting for show to start. Then getting removed so arena owner can seat an employee.
Or you are in line early, buy the blue cooking pot and start walking out the door. Wait a minute! Give me my pot back says Nordstrom manager! Here’s a voucher to buy pot tomorrow and a credit for your troubles. Doesn’t help much if you need the pot that night for dinner.
Lastly ATM running out of cash is not equivalent at all to this situation. That is equivalent to going online to buy flight to and it’s sold out. Not this case at all

421 FE April 12, 2017 at 12:26 pm

Yes. In part this episode is about when the passenger takes ownership of the seat. Of course, it’s United’s position that the passenger never takes ownership – they claim the right to boot him off at any time for any reason. But most people’s intuition seems to be that once the passenger is seated, he has a right to the seat (or in your analogy, he has already bought the pot) and the airline ought to bargain with him to buy it back. I expect United will adopt that rule after their policy review.

422 Eric377 April 12, 2017 at 11:48 am

Paying customers and need to get (4) employees to Louisville from Chicago by sometime the next day? Right, that Louisville that is at the other end of the smallish state of Indiana on interstates all the way. That they even turned to the idea of using their sold-out airplane for this purpose is inane. Chicago is their major hub – they have cars that could have been easily driven to Louisville sitting around. And in the totally odd case they couldn’t find one, well I sure bet that someone had a rental car available somewhere in O’Hare.

423 msgkings April 12, 2017 at 12:15 pm

Yeah for a few grand they could have taken the flight crew to Louisville in a limo. Saved a ton of headache and money. Gotta be more flexible or stuff like this happens.

424 Kevin- April 12, 2017 at 1:03 pm

Haha, this is the first time I’ve seen anyone make this absurdly obvious point. I’ve made that drive a few times, and it’s easy to do in well under 5 hours, even with traffic. A bit inconvenient, yes, and I’m sure airline pilots would be tremendously insulted to be driven between airports, but it would have been an incredibly simple and cheap solution.

425 FE April 12, 2017 at 1:15 pm

The flight crew will be annoyed, and Gary Leff suggests that their union contract says they don’t have to consent. But that just means there’s another opportunity for bargaining. United could have offered the flight crew the $800 to take the limo instead.

426 Mike April 13, 2017 at 4:55 pm

“…Gary Leff suggests that their union contract says they don’t have to consent.”

LOL. Who are these people who keep demanding that United honors all the contracts it signs?!? Customers, employees…they’re the worst. Can’t we just get rid of all of them?

427 John April 12, 2017 at 12:27 pm

Imagine if airline employees had to maintain a 4.7 out of 5 stars rating.

Uber and Lyft efficiently find and fire bad apples.

428 msgkings April 12, 2017 at 12:41 pm

If passengers had ratings too (just like with Uber) this guy would have gone very quietly.

429 JWatts April 12, 2017 at 12:42 pm

Hmmm, if customer service employees had badges with unique ID, there would be an opportunity for a rating app.

430 collin April 12, 2017 at 1:21 pm

No airline employee would get 4.7 out of 5 stars because no airline would get 5 stars. Last week, I was on the United volunteer list (although not boarded) and I found the gate agents were 2 star level of service. (I did get on the flight) I bet it was United process for the gate agent not to talk about my situation so it was United not the employees that get 2 stars.

Also, I bet gate agents are graded on how little they give to ‘volunteer’ customers.

431 Brian April 12, 2017 at 1:01 pm

I understand the general idea that paying people who were not provided a service generally increases the length of the queue and is therefore not an optimal solution to this general type of problem. I do not see much insight there. While the analysis is clearly true, it is also clearly irrelevant to the United situation.

Ticketmaster or the home good store does not have control over the number of people who show up wanting to purchase the product, but United absolutely is in control over the number of tickets it sells on each flight. The over booked status of the flight is a function of United’s booking practice. Paying off the marginal extra passenger will not create the negative externality because it will not induce more paying customers to show up for their flight, the number of paying customers is set by the Airline. And even if it did marginally increase the likelihood that a paying passenger changes from a no-show to a show, who cares? The airline’s overbooking model will quickly adjust to the likelihood of a paying customer showing up for the flight and decrease the number of overbooked tickets sold back to the optimal level. Your whole analysis is based on an open system of potential buyers, but the United case is a closed system.

432 subdee April 13, 2017 at 11:08 pm

+1

433 Mike April 12, 2017 at 1:24 pm

Very surprised to see that Tyler whiffed so badly on this one. A few points:

1) The Nordstrom and ATM analogies are completely broken. To fix them you need to recognize that the retailer/bank has complete control over the queue length to begin with. So the correct ATM analogy would be that WFB issues 100 ATM cards that each guarantee that a customer can withdraw a single $20 bill from an ATM on a specific date. The ATM will not dispense cash to anyone else, and it also happens to be the only ATM in a 100 mile radius. However, WFB only stocks 99 $20 bills because it expects that (at least) one customer will fail to show. All 100 customers arrive on the prescribed date, with valid ATM cards, needing cash, and ask WFB to fulfill its contract. WFB declines to do so for at least one customer.

a) Is the customer due some compensation?
b) If so, does WFB then face an unending queue of customers with legal demands for compensation regarding the empty ATM?

(Hint: If you answered “yes” to the first question, the answer to the second question is “no.”)

2) In the overbooked scenario, offering increasing voucher amounts to volunteers until you are no longer overbooked is obviously the first-best solution. It’s a simple reverse auction, and this is literally the second or third day of Econ 101. You can’t dispute it unless you are willing to completely reject markets as a valid mechanism for allocating scarce resources.

Given this fact, the question then becomes whether it could somehow be welfare maximizing to get passengers to buy into a system in which you’re committed to generating unnecessary deadweight loss. Under perfect competition, complete information, etc., I’m pretty certain the answer is no. The only argument I could see for the alternative, which Tyler alludes to, is that this gives the airline a dimension on which to price discriminate, and we know that marginal cost pricing is not going to be possible on some flights (i.e. some flights go out empty). However, the airlines have had no trouble identifying a myriad of other dimensions on which to price discriminate, so it’s going to be tough to argue that there’s really a scarcity price discrimination opportunities that should lead us to pursue solutions guaranteeing DWL.

3) There are no binding “price controls” here constraining UA’s VDB offers. Min($1,350, 400% of fare) is the legal *minimum* that UA must offer for the IDB. There is no legal maximum. A firm run by competent managers would have considered the potential liability of using physical force to resolve a contract dispute and added a few hundred United bucks to their VDB offer. UAL Corp is, as should be obvious, not run by competent managers.

434 byomtov April 12, 2017 at 1:32 pm

Second, given that the stock of United tanked after the incident, now airline customer service will improve rather rapidly. In the long run of course that will translate into higher prices too, so the net effect of this shift will prove regressive. The more you complain, the more you are redistributing wealth — through the medium of preferred price-quality configurations — away from lower earners and toward the wealthy.

Not necessarily true at all. Yes, prices may rise a bit, but that doesn’t imply the rest of it.

The question is who values the implied insurance against being involuntarily bumped the most. Sometimes it’s the business traveler with an important appointment to get to. But it could just as well be the low-fare passenger off on a rare and carefully scheduled and planned vacation.

Also, it may be a lot easier for the business traveler to call and reschedule a meeting – “Damn airline. I got bumped” – than to change vacation plans at the last minute.

Tyler’s analysis misses a lot.

435 Robert April 12, 2017 at 2:35 pm

Yes. The airline must presume that all passengers are equally important, and has no right to make value judgement based on people’s stories. A doctors need to be at the hospital is no more important than a person who needs to make a cruise, or a man going to his mother’s funeral, or a kid going to a Kanye West concert. They are all equally important. So any bumping algorithm has to be first-come-first-served or price paid per ticket or something arbitrary.

436 KevinH April 12, 2017 at 1:37 pm

The Nordstroms analogy is terrible, as this sale has already happened. If Nordstroms sold you a blue pot, then you went to pick it up and they said ‘sorry, we don’t have anymore here is another pot’ that you didn’t like, and when you refused to leave they got the police to forcibly remove you, the analogy would be better.

Contracts are supposed to be deals where both parties understand and agree to a mutually beneficial situation. Given asymmetries in information and upfront costs in designing complex contracts, large corporations have more and more been able to create one-sided contracts. This is not a good thing for markets and leads to all sorts of distortions.

437 RustySynapses April 12, 2017 at 1:43 pm

i think Tyler should just try again

438 msgkings April 12, 2017 at 1:46 pm

With 400+ comments? Whatever for?

439 TuringTest April 13, 2017 at 9:25 pm

So, is Tyler just trolling us?

440 Paul April 12, 2017 at 1:44 pm

What a strange analysis.

The flight was not “overbooked” there were enough seats for all the passengers. United had a logistics problem with its staffing and abused the overbooking mechanism to avoid sending four employees to another airport via a more expensive method. That’s UA’s problem.

UA did nor raise the offer price because the auction works! Not because it does not work. They knew they’d have to pay more than they wanted to.

The passengers had already paid for their flight. Examples with raising pot prices are irrelevant.

Department of Transportation rules allow a passenger to refuse to move, up to the point they’ve been offered $1350 in cash (not vouchers.)

441 Nils Franco April 12, 2017 at 1:52 pm

I will join the chorus here and note that I am flabbergasted that the author would consider a line for tickets from a box office comparable to a ticketed passenger who has already processed the transaction.

If the plane company overbooks the flight, that is the company’s decision — one that makes the situation incomparable to a Macy’s sale or a box office line.

The airline imposes a risk on passengers to maximize their own profit. Fine. You can argue passengers should know the contractual details. Unrealistic, but fine. But this is messy, and airlines don’t exist in a homo economicus vacuum. They deal with humans who want to get home, and who are risk averse. In the long scheme of things, they would lose by incurring such a risk on their passengers. Airport experiences are anxious enough without added uncertainty about whether you’ll be involuntarily kicked off the plane.
Airlines can – and do – limit the risk for passengers on overbooked flights by ensuring that, when they do overbook, they offer cash to passengers willing to reschedule. That way, passengers are not retaining any unwanted risk when booking. If they cannot reschedule, they rest assured that someone else will accept cash. This is obviously dissimilar.
What United chose to do may be part of a profit-maximizing effort, but it is a myopic and unsavory one that is not sustainable in the real, emotional world. Economists would do well to recognize that emotions play into demand and public relations matter. To deem the emotional public response unsophisticated may itself be an unsophisticated view of the messy world.

442 Nils Franco April 12, 2017 at 2:05 pm

Also, re: the last graph of the post –
The FCC imposed a price *floor*, not a price ceiling.

443 Robert April 12, 2017 at 2:30 pm

I’m a United “Global Services” customer, with about one flight/week and over $100K in _spend_ on United each year.

Since I fly a lot, I know the rules for IDB. They need to offer CASH. The law requires it. (See https://www.law.cornell.edu/cfr/text/14/250.5 )They didn’t over cash. They were offering $800 in travel credits. Which come with a big asterisk. And to many people are useless. People like me who fly for business and earn more free flights (via miles) than they can use don’t want “wampum”. They want cash.

Also despite being in a major hub, United was offering a flight nearly 24 hours in the future. Surely they could have used their cross-booking arrangements with other airlines to get that person there sooner, at least first thing the next morning if not later that evening. United didn’t even try. I suspect people weren’t budging since they were so far from what airlines usually do to accommodate people.

While I would get out of my seat if asked to by a law enforcement, I may drag my feet if asked to do so by cabin staff if I’m sure I’m in the right. Because this man wasn’t yet offered cash, as required by law, it’s understandable and reasonable that he’s say “no.”

444 ST April 12, 2017 at 3:32 pm

Delta offers gift cards for this exact reason.

I bet if you call up they’ll match status…

445 FYI April 12, 2017 at 3:02 pm

On the social side, I find that this episode shows how entitled we as a society are. All these people trying to equate buying a ticket for a service with a “right”. Or even worse, trying to say that someone can deny an order by police just because they think it is “unfair”. No wonder you have our policy behaving so violently. In the video, you can clearly see that the police reach out and talk to the guy first and then use physical force. I have also heard reports that this guy had been refusing to leave for more than one hour. Doctor or not, you have to have a inflated sense of self worth to think that delaying everybody else for reasons you really don’t understand is a valid social stance.
Sad.

446 Jon April 13, 2017 at 8:41 am

Now that the dust has cleared a bit, it seems the facts are this: this wasn’t an overbooking situation, and thus there is nothing in the law or the ticket contract that permitted United to forcibly remove the man from the plane. It’s a bit rich to accuse the Doctor of being obstinant “for reasons [he] really [didn’t] understand” when it seems that the Doctor’s intuitive understanding of his rights was more accurate than United’s understanding of his rights.

447 Jack April 12, 2017 at 3:11 pm

What is interesting about this incident is not the game theory angle but the widespread anger it has evoked. Like so much of US industry (e.g. health insurance, cable, broadband, telecom) the airline industry is an oligopoly with poor customer service, high prices and excess profits — no wonder that the Sage of Omaha just revealed a large stake in the industry. The citizens feel powerless in the face of the obvious brutality, smarmy PR that immediately released Kompromat about the victim to to damage his status, and the indifferent and not very smart CEO, who will nonetheless make in a year more than the average American would make in three, four or five lifetimes.

448 Art Deco April 12, 2017 at 5:09 pm

the airline industry is an oligopoly with poor customer service, high prices and excess profits —

The airline industry is a Bertrand oligopoly with next-to-no profits. Grocery stores might have better margins.

449 ST April 12, 2017 at 3:31 pm

Very interesting, but you missed the currency side of the equation in this analysis.

United is offering $X… in travel credits on a future UA flight.

$1350 in cash has a VERY different value than $1350 in future travel on an airline that has just inconvenienced you. It’s like Jose Cuervo sending you a case of tequila because it accidentally made you sick.

Delta in comparison dealt with many similar issues the week before by offering payments in gift cards, which are closer to having a direct cash value / avoid compensating for trauma with the thing that caused the trauma.

450 Eric Rasmusen April 12, 2017 at 3:43 pm

I just wrote a 13 page memo on the law and the economics of this kerfuffle. See http://www.rasmusen.org/papers/united.pdf . Part of it explains why the OP is wrong, though I don’t mention Prof. Cowen’s name.

Comments and corrections are welcomed.

​Eric Rasmusen
Dan R. and Catherine M. Dalton Professor,
Department of Business Economics and Public Policy, Kelley School of Business, Indiana University, HH 3080H
Erasmuse@indiana.edu . Twitter: @erasmuse.
Office secy.: 855-9219. Cell: (812) 345-8573. Texts: 8123458573@vtext.com. Twitter: @erasmuse

451 Latte April 12, 2017 at 9:02 pm

You need to check, there might be more than two different Dr. Dao. Dont get yourself into trouble.

http://claireconnelly.com.au/hello-humans/united-will-rough-you-up-before-it-pays-for-its-mistakes/

“UPDATE: So it turns out that ‘The Meeja” confused Dr David Dao, last seen being hauled off a United airlines flight, with another David Dao who was arrested for soliciting a gay prostitute for drugs and now they all stand to be sued for defamation. Hate to say I told you so… More to follow. “

452 Latte April 12, 2017 at 9:13 pm

Hmm. The site seems to be down now. Still the Vietnamese surname Dao is pretty common. The extra info is not crucial to your arguments.

453 Latte April 12, 2017 at 9:48 pm

“Don’t listen to anything your lawyers say.”

Market opinion trumps lawer’s opinion.

“Why Did United’s Stock Price Fall So Much?”

Stock price depends on future growth. The future growth is in the US-CN and US-HK sectors which UAL currently has about 20% market share. Now that market segment seems to have adverse opinions on UAL and it has looong memory. It would be easy for competitors to muscle in. UAL seems to already have bought new aircrafts for those segments.

“I’d suggest to United that they change the name of the airline entirely.”

Rebranding might not be enough. Possible options,

1. Split the company into seperate entities for international and domestic markets. Disassocite the international entity from the domestic entity.

2. Sell the US-CN business to its Chinese partners.

3. Drastic restructure of the senior management.

4. Waiting for brave takeover offers.

454 Enrique Guerra-Pujol April 13, 2017 at 5:34 pm

It’s 18 pages, with the Appendix.

455 Benjamin April 12, 2017 at 4:00 pm

The problem with the first half of your analysis and comparison to sales and queues is that United already sold the tickets. So it isn’t comparable to waiting in line for concert tickets or a sale at a department store.

456 peri April 12, 2017 at 4:44 pm

My elderly American parents will be boarding a 20-hour flight tomorrow morning. I know they’ll be up before two to be ready to go. They are going to the extra expense and bother of arriving for their tour 2 days early and staying on an extra day, in order to be on a direct flight, because changing planes has become difficult for them. They will have certain other things to worry about, on the flight, that younger people do not, that I will not go into. If there were an auction for their seats, as so many of you are proposing, neither would hear a word of it. If their names came up in a “lottery,” they would not squeal like pigs, but they would have to be told a couple times before they understood what was being asked, and they would not turn on a dime getting off. They would then probably occupy about 3 hours of the desk clerk’s time. Tears might start to my mother’s eyes – it doesn’t take much – and she didn’t even want to go on this trip in the first place. I think perhaps it would put paid to the whole thing.

I realize this is vanishingly unlikely to happen to them on an expensive flight they booked probably 8 months ago, but if in the Chinese media they are suggesting old people should be excused from such occurrences, they are right.

457 J Perez April 12, 2017 at 4:46 pm

Dear Mr. Tyler.

I am sorry but your analysis here is total BS. You are comparing two situations that are so totally different that they are not comparable at all. The queue the troubled doctor was ejected from was a queue to obtain a product/service already PAID for. All of your other examples are queues to purchase a product/service in the first place. The main difference is that the first queue size is already controlled by the provider of the product/service. He already knows how many people paid for the product/service and he is obligated to fulfill. The second queue does not have that requirement the seller has no control of how many people will show up on line to request the service and he/she does not owe anything to anyone who fails to be able to purchase the product/service. Therefore, both situations are not remotely comparable other tan both involve queues.

458 Rebecca April 12, 2017 at 5:51 pm

If I stand in line to buy a concert ticket and they sell out before I have a chance to buy my ticket – I do NOT show up to the concert expecting a seat. I know that I missed out. Bummer.

However, if I DID manage to get in the line early enough and bought a ticket – I can count on the fact that my seat will be waiting for me when I get there.

459 Doug April 13, 2017 at 8:27 pm

It’s worse than that. It isn’t a queue at all, he was IN HIS SEAT! Imagine you go to a concert, get a ticket, get in, and are sitting in your seat when a bouncer comes up, and tells you that you have to leave the concert because they want the seat for one of the venue’s employees.

460 Phil April 12, 2017 at 5:03 pm

Your post is just wrong. Your examples are about getting to buy products. These passengers had already bought the product. They were just waiting for the service to be provided. A more equivalent example would be buying a ticket for a concert (for specific seats) and then showing up, sitting in your seats and then the organizer telling you that you had to leave because they had some VIPs that they wanted to give your seats to.

Also, you clearly don’t know how airlines price tickets. It is not a fixed price like your pot example. They can and do adjust the prices as demand increases and decreases in an attempt to sell every single seat on the plane.

461 Thiago Ribeiro April 12, 2017 at 5:45 pm

I feel sad to see that in Trump’s Almight Dollar-worshipping America the rich and powerful can have an innocent man beaten and cast out into the outer darkness, where there is weeping and gnashing of teeth, just to advance their own selfish plans. Woe to America.

462 Paul April 12, 2017 at 6:19 pm

This was a management decision to lo-ball the passengers, not even offering the DOT rules’ required last best offer, and it was not even “overbooked”!!!

It was a cheapo solution to UA’s own logistics problem at the customers’ expense.

Then smoke and mirrors “the computer has chosen you “randomly” “to make a passenger feel selfish and unreasonable if their number came up and they didn’t accept it meekly.

No need for game theory. The auction solution would have worked. Delta bumped thousands of passengers recently, read any horror stories there?

463 Sam Kaplan April 12, 2017 at 6:23 pm

As always, enjoyed your post but was puzzled by the concert analogy: “To consider possible analogies, let’s say it was a queue to buy concert tickets, with more people in line than seats for the show.” Isn’t it more accurate to write, “let’s say people had tickets to a concert which they had already paid lots of money for. They made plans to go to the concert, including paying babysitters, going out to dinner, etc and when they queued up to get into the concert hall, were told that four of them would “randomly” not be allowed to attend the concert that night.”

464 Mcmike April 12, 2017 at 8:27 pm

Omg i just wrote the same reply.

I hope the authorities dont drag mine off the thread

465 Mcmike April 12, 2017 at 8:25 pm

The concert ticket analogy is faulty.

You did not include that after queueing all night in the rain for tickets, taking time off work, bringing a date, arriving at the concert facility two hours early, paying for parking, buying overpriced beer and tshirt, and taking their seat behind a tall man in a cowboy hat…

They might get dragged from their seats by security without warning or recourse.

Amazing how hard some people work to avoid confronting the fundemental brokenness of that.

466 Mcmike April 12, 2017 at 8:52 pm

That last paragraph of mine was a little more acusatory than necessary.

But the underlying sentiment holds. To riff off ed abbey, some libertarians seem unable to recognize manure even when they step in it

467 Dave Barnes April 12, 2017 at 10:13 pm

The correct response when someone TELLS you to do something is always: Fuck Off.
This is ‘Murica godamnit.

468 Leo April 13, 2017 at 1:47 am

When you write long posts it reminds me you’re so limited.

469 prior_test2 April 13, 2017 at 2:28 am

So much disappointment in so few words.

And yet, pretty much the decades old judgment of the rest of the faculty and staff at Mason when discussing Mason’s econ dept.

470 Enrique Guerra Pujol April 13, 2017 at 10:23 am

Tyler is overthinking this one. Game theory is unhelpful here. Instead, we should stick with simple rules (as per Richard Epstein): Once a passenger is seated, he does not have to get off the plane, and that’s that.

471 Andrew Mell April 13, 2017 at 10:46 am

There’s one aspect of the auction / forcing people off trade off that hasn’t been discussed which is the informational advantage that would accrue to the airline if they were to run an auction.

I saw one statistic saying that United bump around 4,000 customers a year. Assuming that is four per flight (on the basis of this n=1 sample which is not good practice, but just for the sake of argument), that means that they have to bump people from around 1,000 flights a year. Assume about 100 people on each flight from which people are bumped. So if they were to instead hold an auction (some equivalent of 2nd price sealed bid, again, just for the sake of argument) they’d then get a reasonable estimate of the consumer surplus enjoyed on a flight by around 100,000 of their customers every year (I am assuming valuations are independent etc.)

Combine this with all the information they would already know about the customers from the time of booking (ZIP code, occupation, bank card used to pay for the flight) and maybe add a few other useful demographic indicator questions at the time of booking which might be useful explanatory factors about willingness to pay (e.g. purpose of visit etc.).

The data starts to look as though it might be a valuable tool in pricing flight tickets.

472 R Richard Schweitzer April 13, 2017 at 11:53 am

This was not an “overbooking.”

It was a logistical screw-up in crew positioning (timing, placements and transfer facility).

This was a serious malfeasance in the use of contracted security personnel (not police) in a situation the did not involve security or safety.

473 Howie from maui April 13, 2017 at 8:06 pm

Was it ever determined if First/Business Class passengers were also considered to be included by the “random” selection process?

474 Marc Danziger April 13, 2017 at 8:56 pm

This is so wrong I’m shocked that Tyler wrote it.

His entire argument falls apart when you realize that the examples he uses of queuing issues are for _people who haven’t bought the item yet_. That’s vastly different than _denying the item to people who already paid for it_, and who supposedly already made it past the filter of “we ran out of seats.”

Airlines oversell to help their margins; when was the last time you flew next to an empty seat? The issue we’re dealing with comes _after_ the sale.

Tyler’s whole argument collapses because of this, and he ought to pull this and rethink it.

475 GWO April 14, 2017 at 9:14 am

Yes, thank you. For Pete’s sake, it doesn’t take a Harvard education to see how buying an airline ticket and showing up at the airport is different from…walking up to an ATM and realizing it’s out of cash.

476 bill April 14, 2017 at 3:05 pm

Not price controls at all. Those are MINIMUM required payments. United had to offer a certain amount. They could have offered more. And yes, those minimums should be raised.

477 Jeremy Bancroft Brown April 16, 2017 at 5:28 pm

Hi Tyler, it’s not true that the USDOT limits compensation to bumped passengers. In fact, the USDOT only places a maximum on the minimum-legally required compensation tied to ticket price. See this link for more information: http://www.dailykos.com/story/2017/4/11/1652290/-The-Widely-Misreported-1350-Maximum-Offer-for-A-Passenger-Voluntarily-Giving-Up-A-Seat

478 Rick Hull April 17, 2017 at 12:00 am

> One problem with using money to buy people out of queues is that it encourages more upfront queuing to begin with, and that involves negative externalities for passengers as a whole. In any model of stochastic demand and fixed capacity in the short run, demand will sometimes be too high, and I don’t know of many retail markets that rely on price alone to ration quantity. Given that reality, I am not sure why everyone is insisting the airlines should do things this way. If Nordstrom starts to run out of their blue cooking pots on the day of the sale, so be it, they don’t raise the price toward the end of the day as supplies dwindle. Paying $5 to each denied pot-buyer just ensures they are more likely to run out of pots the next time around.

Ugh. Buying someone out of line is no more of a retail market than an ebay auction is a retail market. And besides, Delta already does this successfully. The airline ticket prices themselves fluctuate wildly over time and space in response to supply and demand along with a healthy dose of price discrimination, a fact which most economists applaud. This entire paragraph is baffling and feels like sophistry.

479 Nick Vivion April 17, 2017 at 12:41 pm

Hopefully there will be more awareness of the contracts we all enter into regularly when we purchase goods and services. We need to read the fine print!

Also, related to the trading of “rights,” the blockchain is perfect for this. Especially ether, which could build out Smart Contracts to set the rules on who trades what and for how much.

N

Comments on this entry are closed.

Previous post:

Next post: