Eliot Lear's Ramblings

Airline Upgrade Auctions?

Bureau of Economics Those of you who know me know of my interest in economics, which started literally on my first day of college, thanks to a great professor named Joseph Seneca. He managed a lecture in 1983 of over 400 students in Scott Hall at Rutgers University, twice a week, for two semesters at 8:05am for an hour, covering Introductions to Micro- and Macroeconomics.

With that start in mind, I have learned to ponder my day-to-day issues with an eye on supply, demand, marginal benefit and cost, trying to understand profit maximization. It’s also why I like reading books like Age of Turbulance, by Alan Greenspan. While I do not subscribe the Greenspan’s anarcho-capitalistic approach to managing the economy, I haven’t been chairman of the Federal Reserve, so I’ll assume he knows a few things more than I do on the subject.

This brings me to two of the most remarkable Internet creations: priceline.com and eBay. eBay is remarkable not so much because of the vast amount of innovation that went on in its inception. Rather the founders applied very straight-forward economic doctrine to bring buyers and sellers together in a common market place so that goods could be sold at their optimal prices. eBay is elegant in its simplicity.

Priceline.com works along the same lines as eBay, but makes legitimate the grey market in airline tickets, hotel visits, and the like. And who can’t like a company that employs William Shatner as its spokesman? There are several limitations, however, to priceline that have often stopped me from considering them. One of the big ones has been an inability to upgrade to a higher class of service. This perhaps may sound snobbish, but sitting on an airplane with my legs cramped in front of me for 12 hours is not my idea of a good time.

And so I’ve wondered about an idea: why not let airlines auction upgrades? If the airline hasn’t sold a business class seat by the time of the flight, they could hold a pre-arranged auction that consisted of bidders who wanted the seat, complete with reserve pricing. Wouldn’t this maximize the airline’s profit? After all, people have done this on eBay without airline participation allowing individuals to maximize their profit, leading airlines to put many controls in place to prevent it.

There are of course a few problems. If you’re a very frequent flyer you expect to be upgraded all of the time without having to go through the hassle of an auction. And if you’re just a frequent flyer you expect to get upgraded some of the time. If you’re a business class traveler who normally pays the a factor of three more than the discount coach seat, you may instead decide that it’s cheaper to bid in the auction and get the same results, thus causing the airline to lose money on the proposition.

I’ll discuss mitigations to some of those problems in a future post. For those wondering about the picture, that’s the Bureau of Economics, which is part of the U.S. Federal Trade Commission, and not a Greek temple.

Viva La France!

France

Happy Bastille Day!

It was on this day in 1789 that The Bastille itself was stormed, it having become a symbol of oppression where many folks lost their heads. Let’s take a moment to recount just a few things the French have brought the world (and for now we’ll exclude french fries, french toast, and frenching).

French Wine— France offers a wide variety of reds and whites, including some interesting sparkling reds. Chateua Nuef de Pape, Cotes du Rhone, and the big ones like Pomerol are something they’ve given me.
Bread— Nobody does a better croissant than France. Napoleon even erected a fort in the Alps to keep the Italians from stealing all the good bread. Italians need to learn how to make bread like the french.
The Statue of Liberty— a remarkable lady whose purpose seems forgotten in this unkind time.
The United States of America— Without Lafayette there would have been no U.S.A.
The Citroen— without this peace of junk, there is no way the big three could have lasted as long as they have.
The Crepe— need I say more.

So Happy Birthday, France! Salut!

Update: No Sooner Had I Finished Writing, When…

The U.S. Circuit Court of Appeals for the District of Columbia threw out an entire raft of regulation, regarding CO2 emmission. Either as planned or unplanned incompetence, the Bush administration’s protection of the environment has simply been incompetent. Or worse. The Wall Street Journal reports today that President Bush is renewing his ridiculous calls for more drilling in sensitive areas.

The Do Nothing Presidency

Smoke Stack

Yesterday, the Bush Administration released a long awaited report by the Environmental Protection Agency, that says that Carbon Dioxide can and should be regulated. One would think this a remarkable departure for an administration that has done everything within its power to destroy the environment, through drilling in fragile environmental areas, unmitigated logging, and the failure to protect endangered species. There’s a catch: the Supreme Court ordered the EPA to develop the report, and in releasing it, in the same breath, the administration argued that regulation by the EPA to protect our children will hurt business and industrial growth.

Let’s review our tally for this administration:

Housing — Failure to properly regulate the housing market has led to a massive series of bank failures.
The Energy Market — we are suffering from inflation due to a massive increase in oil prices, which itself is in part due to an inability of Americans to conserve. The administration has done absolutely nothing to reduce consumption, or for that matter offer fuel alternatives. Instead, they’ve argued that drilling in wilderness refuges will offer some form of relief, a claim that is disputed by every expert in the field, because it will offer no short term relief, while medium and long term relief are by no means at all assured.
Security— having gone to war twice and wasted billions of dollars on meaningless programs, the administration has managed to alienate America from the rest of the world, reducing people’s desires to visit, impacting tourism, and reducing our national credibility. At the same time the Taliban has rebuilt itself, and we’ve lost our allies in Pakistan and now, seemingly Iraq (not that Prime Minister Maliki was every clearly an ally).
Education— No Child Left Behind has meant that our children haven’t gone forward as a group. Our public education system remains in a shambles due to lack of incentives for good teachers, buildings that are falling apart, and a general willingness by this administration to divert funds to religious programs.
Public Transportation— our skies are more dangerous than they have been since the creation of the FAA. More runway incursions, more close calls in the air, disgruntled workforces, and disgruntled passengers have left our air transportation system in a mess, while we’ve invested nearly nothing in ground public transport.
Public Welfare— with a remarkably lame response to Hurricane Katrina, the administration demonstrated that they could not be trusted with emergency crisis management.

In short, they did nothing except collect pay checks. Perhaps Americans will pay more attention to our civic responsibilities the next time we hand someone the keys.

iPhone Day: Observe the Tortured Believers

iPhone Well, today is the day the iPhone goes on sale. The 2nd generation sleek phone from Apple looks to be quite a bit nicer than the first, starting with improved Internet performance, and considerably better 3G battery lifetime than on any other telephone yet produced, and an open application interface for more applications. Combined with a great user interface, a friendliness toward the enterprise, and a nice feature set, it will probably make a really good PDA.

If you want to be the first on your block with one of these gadgets, you’re going to have to get up early and wait in a long line. Otherwise, stores will run out. In some cases, stores have been allocated less than 20 phones. Why is that? It’s not that this device is a surprise, or anything. And surely Apple could manufacture enough so that people needn’t have to bother with all of that hassle.

But for those few who buy hook line and sinker into the Steve Jobs Reality Distortion Field, it’s a ritual, and they love it. Surely Steve Jobs wouldn’t want to deprive his followers of that “Joy”. The Believers get to brag to the rest of us for a few days or weeks about their new gadget, and how everyone is going to copy them. They are the trend setters for the day. Of course they spent that day waiting in line. They’ll spend the next few days figuring out all of the little bugs that Apple has assuredly left lying around. And then they’ll realize, “Oh dear. GPS doesn’t work in my home,” as if they didn’t know where home was. And they’ll read their mail at the restaurant, and even off of their new toys right next to their old Apple monitors that are connected to a recent Apple of some variety.

What’s more, this phone isn’t really cheaper than the previous version. According to the Wall Street Journal, AT&T in particular has jacked up rates in order to recoup their costs (and, they hope, more).

Still the iPhone is an important innovation, if for no other reason that they have brought to the cellphone market a refreshing jolt of competition that seemed absent. Sure, LG was interesting, but aside from a few geeks, the rest of us bought Sony Ericsson and Nokia phones, both of which have had the same capabilities for what seem like eons.

So it’s iPhone Day. Perhaps celebrate by watching your Believer friends suffer. Don’t worry, Google Believers: you’re next.