After United Airlines passenger David Dao was dragged off of a plane and bloodied in 2017, airlines went to extreme lengths to avoid involuntary denied boardings – and committed not to bump passengers from flights after they were already in their seats. We saw airlines offer vouchers as much as $10,000 to make giving up a seat ‘voluntary’ even though legally they could just tell a passenger to stick it and owe them no more than 4 times the cost of their one way ticket in cash, not to exceed $1,550.
This is how badly United didn’t want to give me cash: pic.twitter.com/sI7vmbeB2Q
— Allison M. Preiss (@allisonmpreiss) March 22, 2018
The generous payments have been curtailed somewhat since the start of the pandemic as a cost-saving measure, at both American Airlines and United. And airlines have taken measures to try to limit their payouts even when available, making lower offers first and seeking volunteers in advance, but we still do see overbooked flights at the gate.
That’s when a bidding war ensues and game theory takes over.
- The airline starts low and raises their bid to get passengers to give up their seats
- If the passengers all hold out and don’t take the offers, the amount goes up and whomever gives up their seats gets more.
- But each passenger, by not volunteering, risks that a different passenger will be the one to take home a big score.
Denied boarding compensation is a cooperation game. As long as everyone sticks together, the total compensation amount will be higher. But as the compensation offer goes up the incentive for a given passenger to defect gets greater and greater.
TV writer Mike Drucker observed this in action, and watched passengers in New York stick together, as the airline’s offer went up and up.
At JFK. Guy behind the counter asks for a volunteer to give up a seat for $500. Nothing. "$550." The crowd suddenly coalesces to shout "HIGHER!" like it was a game show. "$750" "HIGHER! "800!" "NOT IN NEW YORK! GO HIGHER!" They applauded the elderly woman who took it at $1100.
— Mike Drucker (@MikeDrucker) December 24, 2022
An ‘elderly woman’ defected at $1100. Perhaps because she was a senior citizen, she met approbation rather than scorn. And $1100 seemed like a success. Given the amount and that it was New York JFK this was likely Delta.
Another Delta story over the holidays involved even more money. Passengers need to stick together.
Delta needed somebody to give up their seat, they OPENED the bidding at a $1500 ON A GIFT CARD. None of that flight voucher bullshit. Gotta respect that. Whole plane stood strong and held out. Never accept the first offer. pic.twitter.com/wf7ZqaG0y6
— Roy Wood Jr- Ex Jedi (@roywoodjr) December 20, 2022
Game theory is useful when considering whether to rat on a criminal co-conspirator (prisoner’s dilemma), nuclear deterrence (focal point), and when dealing with airlines.
That’s pretty cool, seeing passengers engage cooperatively for higher compensation. Who will be the first airline exec to claim such behavior represents unfair collusion and should be made illegal? lol
I was at LGA last week and the bidding started at $250 on a card which I consider too low. $1200 seems fair to me. Then spontaneous game show approach would be fun to see.
I’m getting proactive offers to bid at online check in. Harder for passengers to cooperate that way.
“But each passenger, by not volunteering, risks that a different passenger will be the one to take home a big score.”
People buy a ticket to actually fly, not because they want to enter a bidding war. Personally, my denied boarding compensation number is VERY high. No nothing “risking”.
@DaveS – my issue with the proactive ask is that it still requires me to go to the airport. If the airline wants me to change to a later flight, I might be willing to take less money if they can confirm when they make the offer – it means more time at home/with family/etc. But once I’m at the airport? I’m getting on the plane (or in the plane, as the late great George Carlin would’ve said)
It’s nothing but a big game for the airlines.
My wife and I were on Lufthansa on a business class award many years ago. We flew from Paris to Seattle via Frankfurt.
When we arrived in Frankfurt, there was an announcement that they needed to have one business class passenger volunteer. I didn’t even look at my wife for permission.
I was given an extended leg room seat, business class meal and 2000 Euros in cash which was about $2,700 at the time.
To receive an additional $270 per hour for simply taking a somewhat less comfy seat was a very easy decision.
Other issue is are they offering US $ or store credit.
My first question is: How many gallons of aviation gas or Jet A is the reward good for?
I grew up in Alaska and DIY is my favorite airline code :).
A couple was traveling a few days before Christmas and relayed their experience to a local TV station in the San Francisco Bay Area. Their flight was overbooked and Delta paid them $3000 each to take a later flight.
I was denied boarding, at the gate, having my service dog with me. Although all paperwork had been previously approved by the airline, passed tsa and so on. Never got compensated, and got charged twice for rebooking the same flight… insurance didn’t do anything either. Delta sucks…
I was offered $1000 LAX/LAX but ended up getting $1000 voucher from UA. They needed one seat. The guy next in line offered me $200 cash. LOL. I expect someone else might have taken the cash.
dh
While it is good to push for as much as you can get, you also risk missing out on it completely. Typically airlines will match the highest amount to all of the volunteers on the same flight (at least on DL and UA)
This happened on a flight out of Houston after the World Series. I volunteered at $800 and got $1500 since the needed 3 and went up.
Earlier this year Southwest called me 2 days before the trip and offered me a $400 voucher to change flights. No trip to the airport and they paid less than they would have had to pay at the airport. Win-win.
About three years ago I was going home after a conference when DL needed eight volunteers for my last segment ATL-DUS, starting with an offer of $400 to take the same flight on the next day. A group of teenage girls from Scandinavia accepted at $400. Wanting to play the game, but not wanting to lose a whole day, I looked up an itinerary ATL-CDG-DUS, which was approved by the GA and I was the last to accept at $800 (chose prepaid VISA, as good as cash), which everyone else got, too. I got home 6 or 8 hours late, which was fine, the day after flying back to Europe is ruined by jet lag anyway. Only regret was forgetting to ask for a lounge pass…
@mike g, that doesn’t work in most cases because the whole point of overbooking is because they are expecting last minute no shows. In rare equipment change cases they may offer it before arriving to the airport
@ Gary
Your game theory analogy falls apart, if the passengers in question don’t know or follow the “rules” you have set in your interpretation.
Your assignation of “cooperative” behaviour becomes limited, if the pay-off isn’t shared out (in some way) between the individual members of the coalition (and also to note there is only one coalition of players, not multiple).
The game itself shifts (pay off vs cost) depending upon the information available to the players. Accordingly, the smart play for the airline would be to conduct the offer of compensation in a manner where individuals don’t know what amount is being offered and accepted by other players (i.e. the airline defines the game – so can limit the available information).
A few years back accepted $1000 for taking the next day’s flight to Asia. They threw in a free night at the O’Hare Hilton so no back & forth to the airport.
“….goes up and whomever gives up their seats gets “more.…
Pro blogger fix.
Whoever gives up…
JetBlue forced me out of my seat on Thanksgiving day 2021 because the plane was too heavy. No flight before next day, never reimbursed me transportation to and from the airport (although the airport staff told me they would) and was asking me to wait hours before they could explore provide me a room in an hotel near the airport.
Very poor experience
America West (AA for yall) makes the other passengers pay the denied boarding comp, and takes a 20% “processing fee”.
After all, Cactus is doing the rest of them a favor by not booting them off, yeah?
This is a misunderstanding of game theory. The entire premise being addressed by that field of study is the collective vs individual benefit. There is no collective benefit by not defecting here. If the airline pays *someone else* more money, the group doesn’t benefit even under the most ambitious of successes. In fact, nobody but the first person to accept benefits from it no matter how high it goes.
Everyone else that held out just ends up a sucker that walks away with nothing.
Recently finished my PhD and did a dissertation on applied game theory, so I feel obliged to respond to Aaron’s comment claiming Gary’s post completely misunderstands game theory.
Aaron wrote:
“This is a misunderstanding of game theory. The entire premise being addressed by that field of study is the collective vs individual benefit.”
Game theory is simply a mathematical model of interrelated strategic interaction. Solving the equilibrium of a game has absolutely nothing to do with any notion of “collective benefit,” which is not as easy to define as it might seem.
Game Theory *can* be used to study collective benefit, usually defined as a Pareto improvement, but it’s simply false to assert that the entire field is about this.
“There is no collective benefit by not defecting here. If the airline pays *someone else* more money, the group doesn’t benefit even under the most ambitious of successes. In fact, nobody but the first person to accept benefits from it no matter how high it goes.”
You’re assuming the winner is predetermined. That’s not true if players are using mixed (random) strategies, or if they are using deterministic strategies based on private information (their exact financial/travel situation)
It’s possible for everyone to have some ex-ante chance of winning, and for cooperation to increase the expected reward paid to the winner.
My only *very minor* complaint about Gary’s post: The prisoner’s dilemma is not really about prisoners. It’s a much better model of the tragedy of the commons, or any situation where defecting is a dominant strategy. The original prisoner example only “works” because it assumes the police can get both prisoners on minor charges and can use that leverage to reward whoever confesses to the major crime.
People like that is just another reason why flight prices are higher and making a profit disgusting
I would have grabbed 950. She wasn’t so smart, just lucky.
That is not Game Theory.
You can’t just say “game theory” to sound smart lmao. There was 0 discussion of game theory in this article. Kinda funny tho
“If the passengers all hold out and don’t take the offers, the amount goes up and whomever gives up their seats gets more.”
Whoever*
Are there just not editors anymore?
The people here, claiming that “game theory does not apply” are too narrow in their understanding of what game theory means. Prisoner’s Dilemma is only one game, a set of rules, risks, and payoffs, and either does, or does not apply here, depending on the rules you pick.
Game theory is the more general study of utility optimization within a set of rules, which absolutely does apply here. For example, the game changes completely when the airline gives the passengers the option to choose the bid price when they check in. And game theory can even encompass strategies when the rules are not clear: in our case, we had to choose whether to grab a lousy rebooking that was available online, while waiting on hold for an agent (while others grabbed those rebooking’s), possibly risking being told that they would not give us a better flight because we had already made our choice. Or, being stuck with something even worse.
In the end, we lost half our trip, waiting, five days for the next available flight. But that is more the fault of the weather than the airline this time.
@ Dwight
“You can’t just say “game theory” to sound smart lmao.”
Well, arguably, that’s exactly what @ Gary did in the article above – and as already noted above @ Aaron’s understanding possibly worse than @ Gary’s.
“There was 0 discussion of game theory in this article. Kinda funny tho”
Game theory was indeed “referenced” in the title of the article and invoked several times within the article.
The discussion (from a game theory perspective) was very superficial – so, in that sense it was indeed amusing.
FWIW just for fun – here’s a link to one of the original classics (it only takes 28 pages of mathematical genius to be awarded a PhD at Princeton!) – vale John Forbes Nash.
https://library.princeton.edu/special-collections/sites/default/files/Non-Cooperative_Games_Nash.pdf
Impromptu unionization! Hopefully that teachable moment will resonate with people so they finally understand how badly needed labor unions are in the U.S.
As a gate agent, I love moments like this that give you an opportunity to engage with the crowd, especially when it’s supposed to be stressful, but both us employees and passengers can make it fun! Then again, I don’t work for a cheapskate airline like AA or UA (airlines people love to hate for legitimate reasons) or an ULCC. I don’t work for DL or WN, either!
I don’t take last minute flight 90% of the time. So I’m always gladly open for those fly later options.