7 ms·

I think OP is right but hasn't fully unrolled what they mean. This seems like it creates a moral hazard [1], because it reduces the penalty to airlines for losi

by dcx 3y ago

I think OP is right but hasn't fully unrolled what they mean. This seems like it creates a moral hazard [1], because it reduces the penalty to airlines for losing luggage. If airlines were prepared to accept X in costs from lost luggage before, and now get paid Y, they can now accept about X+Y in lost luggage costs. Meaning more lost luggage! After the system dynamics resettle, from a certain angle this is basically stealing: customers pay the same ticket price, but are paying some percentage more in expected lost luggage. And on top of that, this is just considering the financial cost - what is actually happening is that more travelers are being deprived of their personal belongings. These are worth more to people than insurance payouts! It's surprising, but when you zoom out this seems downright awful. [1]: https://en.wikipedia.org/wiki/Moral_hazard https://en.wikipedia.org/wiki/Moral_hazard

lukevp 3y ago
I mean… the grocery store can make more money by double scanning an item I purchase, or McDonald’s can skim some money by giving everyone one less pickle. At some point the service quality has to be intrinsically motivated by the company wanting to preserve their brand, right? How much could they make off stolen luggage that they’d legitimately lose more on purpose? Surely the payout they have to make of losing luggage both monetarily and indirectly through brand devaluation is greater than the amount of money they’d make selling the luggage?
- dcx 3y ago
  I agree in the abstract, but people and companies operate under bounded rationality. Customers can't easily price the expectation of lost luggage. Companies are made of subunits with independent budgets, each optimizing for incentives with short time horizons. McDonald's is actually a good example, they did exactly this. IMO one reason their brand has been devalued is death by a thousand cost cuts. Each cut is imperceptible and seems like a win. But over several decades the net effect is a disaster. (IIRC Fast Food Nation documented some ideas about this process)
scarface_74 3y ago
An airline owes you $2500 for lost luggage on domestic flights. They aren’t going to make that up by selling to places like this. It’s not like they tell the department responsible for getting your luggage back to you to go through the luggage and determine whether they can make a profit on you. Anecdotally, every thing my wife and I own are in four suitcases that we take across the country 7 months a year making one way trips. https://news.ycombinator.com/item?id=36306966 https://news.ycombinator.com/item?id=36306966 We have to take all of our personal belongings with us when we leave our home so our place can be rented out to cover our mortgage and expenses while we travel over half of the year. For $2500 we could replace everything that we have in any one piece of checked luggage and have money left over. We keep anything of value in our carry on backpack. https://www.amazon.com/dp/B0B12SPPXV https://www.amazon.com/dp/B0B12SPPXV?
- dcx 3y ago
  > On flights within the U.S., airlines are responsible for lost-luggage reimbursement up to $2,500 per person; on international flights, airlines owe you a mere $9.07 per pound, with a ceiling of $640. (That rate was set by an international treaty in 1929.) > Beyond that, airlines owe you nothing for your most valuable items. Most contracts of carriage specifically exempt from compensation things like antiques, art, books, documents, money, cameras, collectibles, electronics, or "fragile or perishable items." [1] Also this is not a guaranteed payout, you may need to provide receipts for your things [2]. In general I would prefer to keep the contents of my bag vs receiving "up to" $2,500. We're mostly working people here. The time and money cost of travel disruptions, replacing stuff, navigating bureaucracy etc. is not low. And my stuff has emotional value. I agree that this setup seems reasonable in a perfect world. But knowing how large, complex companies function, I feel it is unwise to create any kind of loop which rewards airlines as a function of luggage lost. [1] https://www.frommers.com/tips/airfare/the-bottom-line-what-do-the-airlines-owe-you-when-theyve-lost-your-luggage https://www.frommers.com/tips/airfare/the-bottom-line-what-d... [2] https://www.peopleclerk.com/post/airline-lost-delayed-luggage https://www.peopleclerk.com/post/airline-lost-delayed-luggag...
  - scarface_74 3y ago
chrismorgan 3y ago
The obvious solution to the moral hazard is to require that the company not profit from the disposal of the lost luggage. Unfortunately this is difficult to achieve, even imperfectly. “Give the proceeds of the lot sales to charity” sounds like a straightforward solution, but who’s charity? Whoever ends up profiting now has incentive to cause more to be lost; the further they’re disconnected from the airline industry and the specific airline the better. Anonymous donation of proceeds would be best, if it can be managed.
- mcny 3y ago
  It is not possible. This is the same problem I had with government fines such as traffic tickets. People can't afford to spend time away from work fighting stupid tickets So they pay to settle When the district attorney says pay and we will let you go. What happens when government lowers it's taxes and instead gets funded with fees and fines? I'd say airlines should not be allowed to sell any luggage. It is not theirs to sell. If they are caught selling items that don't belong to them, Put the CEO and the entire board in prison for life.

by dcx 3y ago

lukevp 3y ago

I mean… the grocery store can make more money by double scanning an item I purchase, or McDonald’s can skim some money by giving everyone one less pickle. At some point the service quality has to be intrinsically motivated by the company wanting to preserve their brand, right? How much could they make off stolen luggage that they’d legitimately lose more on purpose? Surely the payout they have to make of losing luggage both monetarily and indirectly through brand devaluation is greater than the amount of money they’d make selling the luggage?

dcx 3y ago
I agree in the abstract, but people and companies operate under bounded rationality. Customers can't easily price the expectation of lost luggage. Companies are made of subunits with independent budgets, each optimizing for incentives with short time horizons. McDonald's is actually a good example, they did exactly this. IMO one reason their brand has been devalued is death by a thousand cost cuts. Each cut is imperceptible and seems like a win. But over several decades the net effect is a disaster. (IIRC Fast Food Nation documented some ideas about this process)

scarface_74 3y ago

An airline owes you $2500 for lost luggage on domestic flights. They aren’t going to make that up by selling to places like this. It’s not like they tell the department responsible for getting your luggage back to you to go through the luggage and determine whether they can make a profit on you. Anecdotally, every thing my wife and I own are in four suitcases that we take across the country 7 months a year making one way trips. https://news.ycombinator.com/item?id=36306966 https://news.ycombinator.com/item?id=36306966 We have to take all of our personal belongings with us when we leave our home so our place can be rented out to cover our mortgage and expenses while we travel over half of the year. For $2500 we could replace everything that we have in any one piece of checked luggage and have money left over. We keep anything of value in our carry on backpack. https://www.amazon.com/dp/B0B12SPPXV https://www.amazon.com/dp/B0B12SPPXV?

dcx 3y ago
> On flights within the U.S., airlines are responsible for lost-luggage reimbursement up to $2,500 per person; on international flights, airlines owe you a mere $9.07 per pound, with a ceiling of $640. (That rate was set by an international treaty in 1929.) > Beyond that, airlines owe you nothing for your most valuable items. Most contracts of carriage specifically exempt from compensation things like antiques, art, books, documents, money, cameras, collectibles, electronics, or "fragile or perishable items." [1] Also this is not a guaranteed payout, you may need to provide receipts for your things [2]. In general I would prefer to keep the contents of my bag vs receiving "up to" $2,500. We're mostly working people here. The time and money cost of travel disruptions, replacing stuff, navigating bureaucracy etc. is not low. And my stuff has emotional value. I agree that this setup seems reasonable in a perfect world. But knowing how large, complex companies function, I feel it is unwise to create any kind of loop which rewards airlines as a function of luggage lost. [1] https://www.frommers.com/tips/airfare/the-bottom-line-what-do-the-airlines-owe-you-when-theyve-lost-your-luggage https://www.frommers.com/tips/airfare/the-bottom-line-what-d... [2] https://www.peopleclerk.com/post/airline-lost-delayed-luggage https://www.peopleclerk.com/post/airline-lost-delayed-luggag...
- scarface_74 3y ago

chrismorgan 3y ago

The obvious solution to the moral hazard is to require that the company not profit from the disposal of the lost luggage. Unfortunately this is difficult to achieve, even imperfectly. “Give the proceeds of the lot sales to charity” sounds like a straightforward solution, but who’s charity? Whoever ends up profiting now has incentive to cause more to be lost; the further they’re disconnected from the airline industry and the specific airline the better. Anonymous donation of proceeds would be best, if it can be managed.

mcny 3y ago
It is not possible. This is the same problem I had with government fines such as traffic tickets. People can't afford to spend time away from work fighting stupid tickets So they pay to settle When the district attorney says pay and we will let you go. What happens when government lowers it's taxes and instead gets funded with fees and fines? I'd say airlines should not be allowed to sell any luggage. It is not theirs to sell. If they are caught selling items that don't belong to them, Put the CEO and the entire board in prison for life.