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
Since the beginning of the Pandemic, generous payments have been reduced at both American Airlines and United. Even though airlines try to limit their payouts, we still see overbooking flights at the gate.
Game theory takes over when a bidding war begins.
The game of denied boarding compensation is a cooperative one. The total compensation amount will go up if everyone sticks together. As the compensation offer increases, the incentive for a passenger to defect increases even more.
As the airline offered more and more, the passengers in New York stuck together.
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
A woman defected for $1 100. She met approbation rather than disdain. It looked like a success. This was probably Delta given the amount and the location.
There was more money involved in the holiday story. People need to stay 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
When thinking about ratting on a criminal co-conspirator, nuclear deterrence, and dealing with airlines, game theory is useful.
The minimum amount of cash an airline has to pay a passenger for involuntarily denying them boarding has been increased by the Department of Transportation. The maximum amount of money airlines can be on the hook has been increased.
Three years ago, David Dao was dragged off of a United Express plane and bled to death. Oscar was forced to re-accommodate him. Airlines had to revisit their policies for denying boardings because of the worldwide uproar.
Airlines are trying to cut costs by denying boarding to passengers who overbook a flight. United and American are trying to avoid bidding wars at the gate by copying Delta.