The reverse auction strategy
Airlines typically book more travelers than a flight can carry, with the assumption that some people will fail to arrive for their flight, in order to minimize the number of empty seats. Clearly this runs the chance of having too many passengers waiting to get on the same plane. The usual response to this is to reschedule some travelers and compensate them monetarily for their seat.
Now this becomes a game; one in which the travelers are “selling” their current seats and the airline is trying to buy them. The airline then wants to pay as little as possible for these seats, while still convincing enough people to sell. Assuming that the airline is going to have to buy these seats regardless of how much they end up costing (United Airlines event assumed not to be the a valid solution), the airline’s success depends on reducing the value that travelers place on their own seats. The value that a traveler places on their seat is similar to the reservation price that a consumer has on a product, in this case, choosing to always sell their seat if the airline offers more than their reservation price.
In order to lower this reservation price, a number of strategies have been suggested. In particular, creating a competition may prove to be a successful approach. By offering a large amount of money to begin with, an airline will likely get more volunteers to give up their seat than it needs, so it can then offer less. By doing this repeatedly, somewhat like an auction, the airline can attempt to minimize how much they pay for the seats by isolating the lowest price that will convince enough people to sell their seats. While this already has a clear advantage over just guessing at a money amount and offering it to the passengers, it is also likely to lower the reservation prices of the travelers, because now they must decide between accepting less money than they originally would have, or running the risk of “losing” the opportunity to another person.
https://www.npr.org/2017/04/13/523726313/how-game-theory-relates-to-airline-booking