4 ms·

The game theory is indeed complex. > offer compensation equal to the reservation price of the customer It's a little more complex than this. It's highly feasi

by Fenn 8y ago

The game theory is indeed complex. > offer compensation equal to the reservation price of the customer It's a little more complex than this. It's highly feasible to offer compensation higher than than the original purchase price of the ticket while inducing passengers to move to a different flight, meaning they're effectively being "paid to fly". In many cases, customers are actually not on their preferred flight in the first place, but merely the one that was cost-optimal at time of purchase. Changes in market demand in the intervening 3-6 months can easily mean that many passengers on an aircraft can be compensated above their original purchase value to move to their preferred flight. The above case is an idealised version, but the equilibria is complex and difficult to intuit without experimentation (which is primarily what we're working on). More news as it happens :) Sameless self-promotion (I'm cofounder/CTO): We're also hiring (https://angel.co/volantio/jobs https://angel.co/volantio/jobs / https://www.workatastartup.com/directory/270 https://www.workatastartup.com/directory/270)

nanis 8y ago
> It's a little more complex than this. It's highly feasible to offer compensation higher than than the original purchase price of the ticket while inducing passengers to move to a different flight, meaning they're effectively being "paid to fly". > In many cases, customers are actually not on their preferred flight in the first place, but merely the one that was cost-optimal at time of purchase. You misunderstood. The original purchase is no longer relevant. The airline and the passenger are now in a new game. In this new game, the passenger has a reservation price. Your goal is to estimate that accurately to transfer all surplus from rebooking to the airline and to another passenger. The passenger is not harmed by this per se. They are indifferent between taking this flight vs taking the compensation and flying on another. However, in the real world, people don't really like being driven to their reservation prices in your quest to assign all surplus from this new transaction to the airline and a third party. This is not a new idea. Priceline comes to mind. You could have chosen to work on a decent auction application for this purpose. Instead, you choose to collect data that is unnecessary to solving the actual "overbooking problem", but has the benefit not leaving any surplus from the rebooking transaction to the passenger. PS: Just as a side note, I tend to be very understanding when things go wrong when I fly: http://www.flyertalk.com/the-tarmac/the-2013-tarmac-awards.html http://www.flyertalk.com/the-tarmac/the-2013-tarmac-awards.h...
- URSpider94 8y ago
  Part of the issue they are trying to solve is that the optimal pricing problem is overlaid with a currency exchange problem. Airlines can compensate customers with vouchers, upgrades, cash or frequent flier miles; as well as different commitments for rebooking. Each customer is going to have a different value for each of these axes. Learning about passenger preferences will help airlines to make offers that are most appealing to individual passengers. Ultimately, operating a rebooking system near the Nash equilibrium is great for everyone. People who really need to get from A to B on time have a higher chance of doing so, people who are flexible can trade that flexibility for compensation, and the airlines can operate at higher capacity and sell more high-dollar last-minute seats.
Bahamut 8y ago
This reminds me of a flight I booked about 3/4 a year ago from SF to DC - I had a suboptimal layover in Houston, which was rerouted to be a layover in Chicago after the hurricane triggered changes to my routing. Unfortunately for the airline, it then had to deal with a situation where they overbooked by 10 people. I was offered a first class seat on a direct flight + $600 to switch, which I happily accepted. In truth, I would’ve been happy with just any seat on that direct flight.
- nanis 8y ago
  > I would’ve been happy with just any seat on that direct flight. And, the goal of the Volantio is to collect data on you so that the airline never over-compensates you. That is, all the benefits from the rebooking transaction accrues to the airline. Imagine every time you went to buy a coffee, the coffee shop charged you exactly how much you value the next cup of coffee.
  - deleted 8y ago
    [deleted]

by Fenn 8y ago

nanis 8y ago

> It's a little more complex than this. It's highly feasible to offer compensation higher than than the original purchase price of the ticket while inducing passengers to move to a different flight, meaning they're effectively being "paid to fly". > In many cases, customers are actually not on their preferred flight in the first place, but merely the one that was cost-optimal at time of purchase. You misunderstood. The original purchase is no longer relevant. The airline and the passenger are now in a new game. In this new game, the passenger has a reservation price. Your goal is to estimate that accurately to transfer all surplus from rebooking to the airline and to another passenger. The passenger is not harmed by this per se. They are indifferent between taking this flight vs taking the compensation and flying on another. However, in the real world, people don't really like being driven to their reservation prices in your quest to assign all surplus from this new transaction to the airline and a third party. This is not a new idea. Priceline comes to mind. You could have chosen to work on a decent auction application for this purpose. Instead, you choose to collect data that is unnecessary to solving the actual "overbooking problem", but has the benefit not leaving any surplus from the rebooking transaction to the passenger. PS: Just as a side note, I tend to be very understanding when things go wrong when I fly: http://www.flyertalk.com/the-tarmac/the-2013-tarmac-awards.html http://www.flyertalk.com/the-tarmac/the-2013-tarmac-awards.h...

URSpider94 8y ago
Part of the issue they are trying to solve is that the optimal pricing problem is overlaid with a currency exchange problem. Airlines can compensate customers with vouchers, upgrades, cash or frequent flier miles; as well as different commitments for rebooking. Each customer is going to have a different value for each of these axes. Learning about passenger preferences will help airlines to make offers that are most appealing to individual passengers. Ultimately, operating a rebooking system near the Nash equilibrium is great for everyone. People who really need to get from A to B on time have a higher chance of doing so, people who are flexible can trade that flexibility for compensation, and the airlines can operate at higher capacity and sell more high-dollar last-minute seats.

Bahamut 8y ago

This reminds me of a flight I booked about 3/4 a year ago from SF to DC - I had a suboptimal layover in Houston, which was rerouted to be a layover in Chicago after the hurricane triggered changes to my routing. Unfortunately for the airline, it then had to deal with a situation where they overbooked by 10 people. I was offered a first class seat on a direct flight + $600 to switch, which I happily accepted. In truth, I would’ve been happy with just any seat on that direct flight.

nanis 8y ago
> I would’ve been happy with just any seat on that direct flight. And, the goal of the Volantio is to collect data on you so that the airline never over-compensates you. That is, all the benefits from the rebooking transaction accrues to the airline. Imagine every time you went to buy a coffee, the coffee shop charged you exactly how much you value the next cup of coffee.
- deleted 8y ago
  [deleted]