Market Failure in Auctions?
As did its recent acquisition, Northwest Airlines, Delta is doing on-line auctions of seats that must be vacated if the plane is overbooked. At online check-in, each passenger is asked what price s/he would require to be bumped to a different flight. Yet the results are apparently not acceptable to Delta: After his check in (where he refused to accept bumping), my son was offered $250 via a telephone call six hours before his flight to be bumped to an earlier or later flight. Did Delta not get enough offers online? Were the passengers’ reservation prices too high for Delta’s budget? Or is the airline simply playing games with its passengers, hoping to induce a few of them to accept a lower price? Other explanations? (HT: DJH)