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Game Theory in Airline Customer Service

Having been on several trips via plane where I was extremely dissatisfied with the customer service and the inability of some planes to ever get off the ground, I searched for articles relating to airline inefficiency, well aware I was not alone.  This article gives ten simple things airlines will not tell their customers without sufficient reading of the fine print on any travel website.  What is most interesting is that the airlines’ decisions on what costs and rewards to implement uses game theory.

            While it seems obvious that airlines don’t seem to care as much about their occasional travelers/non-business class folk, the process of deciding who to give any sort of reward to can be broken down in game theory.  If the airline is to give any rewards or upgrades to a passenger, it may be clear that the frequent passenger is the one willing to yield the most return to the airline as they would have more opportunity to stick to that airline for future flights. The return from offering the occasional passenger more rewards, while possibly causing the passenger to stay loyal to the airline, would definitely be less than any frequent passenger.  There are also far more occasional passengers than frequent passengers so the airlines would be giving away far more rewards than they could expect to be returned and would thus lose money.  Giving rewards to all passengers may lessen the deficit from offering only occasional passengers rewards but probably wouldn’t create a profit despite newfound customer satisfaction.

            Knowing that most airlines will not readily care for their occasional passenger is not comforting and recent data from the article shows it is deterring potential customers from flying. For us occasional passengers, it would be nice to see a little improvement in customer service even if it does not yield the greatest reward for an airline.  Maybe if customer service improves enough the social maximizer will no longer rest in the profits of an airline and will be in the hands of their happy passengers.


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September 2011