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What is the name of this auction?

Sometimes my friends make blogging easy. From the inbox:

I'm taking a flight on Delta tomorrow and checking in early online. Toward the end I get a question about whether I would be willing to give up one leg for a different connection – for compensation of course. There were no details on the alternatives, just a question about whether I would be amenable to the idea and, if so, the gate agent would provide alternatives at the gate. I replied "yes" then I got a screen that asked for my WTA as an open-ended question, with a qualifier that Delta would be taking the lowest bids first. Ah, I have a new found respect for Delta…

Delta

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  1. Matthew Hunt Avatar
    Matthew Hunt

    It would be interesting to study the anchoring effect of the example amount ($100 in the screenshot).

    Reply
  2. Michael Giberson Avatar
    Michael Giberson

    Should lead to a more liquid re-booking system, with buy-in from consumers and lower costs for Delta (especially if they DON’T hold strictly to the “lower bids first,” since the lowest bid may not be the lowest cost re-booking to accept given possible interaction with other constraints. Of course consumers won’t know, so little reason for Delta not to profit maximize in resolving overbooking situations).

    Reply
  3. Michael Giberson Avatar
    Michael Giberson

    Also interesting is that with consumers declaring their WTA, Delta can perfectly price discriminate rather than paying a uniform market-clearing bid. If they had to announce over the the PA, “$200 … $250 … $300 … etc.” until the market cleared, everyone would know the final price and anyone who accepted early would want the best price.

    Reply
  4. Timtaylor Home Avatar
    Timtaylor Home

    How much did you put John?
    I think the European levels of compensation for overbooked flights is higher than the $100 example – 125 euros to 600 euros depending on the length of re-route – not giving you knowledge of the length of the re-route must put some people off!
    (http://www.citizensinformation.ie/en/travel_and_recreation/air_travel/compensation_for_overbooked_and_delayed_flights.html#Compensati)

    Reply
  5. Hale Thur Avatar
    Hale Thur

    Matthew Hunt, you are on to something. $100 is not a suggestion of a random ammount. I’m guessing a lot of thought went into that example.

    Reply

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