Overhead Problems

by Elaine Schwartz    •    Aug 25, 2010    •    474 Views

You’ve probably heard the story. Fed up, a flight attendant tells passengers what he really thinks of them, grabs a beer, presses the button for the emergency chute, and leaves the plane. The overhead storage bin might have been the reason.

Overhead bins create frustration for everyone. They increase boarding delays. A cascading overflow can be dangerous when doors pop open. Attendants have to restrain impatient fliers from grabbing a bag before the plane has stopped. A cost saving fast turnaround for aircraft is delayed by passengers having to retrieve their paraphernalia. Deplaning is agonizingly slow.

An economist would disagree with a NY Times solution: “Carry-Ons and Courtesy Need to Co-Exist“. Instead, incentives have to change. Because checked baggage generates huge revenue, airlines have the incentive to charge. Responding, passengers have the incentive to take more onboard. One solution? Spirit is charging for carry-ons. Your opinion?

The Economic Lesson

Two economic concepts explain the problem:

1) The fallacy of composition states that what is good for one is bad when everyone does it. An example is fleeing from a fire in a crowded movie theater. One person, alone, can quickly leave but everyone together cannot. Similarly, one person can enjoy the plane’s overhead bin but everyone together cannot. When airlines decided to charge for checked luggage, they worsened the fallacy of composition.

2) A negative externality is a cost to a third party because of the unrelated agreement between 2 other individuals. Here, the airline agrees with you or me that it is okay to bring baggage onboard. The result, though, is a cost to other passengers and the flight staff. On an aircraft, the negative externalities multiply geometrically because everyone is creating them.

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