At dinner last night there was discussion of the quality of (or lack there of) airline service. One individual complained about the consumer injustice of some airlines now charging for checking an additional piece of luggage. I made the observation that most of us at dinner were business travelers or light packers so, on average, we benefit from the policy through lower ticket prices. “But that’s ridiculous, ticket prices haven’t gone down,” everyone at the table scoffed. I tried, rather unsuccessfully, to explain:
A piece of luggage is additional weight and so adds to the cost of the flight. Absent pricing, the cost is distributed across all ticketed flyers. Unless you carry more than the average amount of luggage, you benefit from the policy by no longer splitting the bill with heavy packers. In fact, flyers will respond to the price signal, begin to pack lighter, on average, and the entire flight will become more efficient, so the cost should go down marginally for everyone, but more for lighter packers.
The same is true for airline food. Unless you really like airline meals, the policy of charging for snacks instead of serving free meals is a net benefit to you.
Of course, given the variability in airline prices and myriad other costs, it would be IMPOSSIBLE for a customer to observe this effect. But unless you think airline prices are set collusively, it HAS to be true.
The logic is glaringly obvious. And yet it amazes me how difficult it is for otherwise exceptional bright people to grasp the concept. How has a species which appears to have selected for a general aversion to or incapacity for economic thinking achieved such prosperity?
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