ECO paper

Southwest Airline Boarding and Game Theory

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1

Change in southwest airline boarding

Southwest airline used to rely on the first come first serve basis booking approach before 2007. After realizing that the methodology was creating confusion and causing congestion, the management ought to experiment with the A B C method. The approach allowed consumers to choose seats based on the time of the arrival. The transition improved southwest airline’s booking until a concern arose on the need to enhance fairness in the booking process in addition to dealing with congestion at the booking offices. The model favored the person with the ability to access the terminal in advance. Consumers checking in at the booking terminals benefitted from the privileges of securing a good seat compared to those booking online. According to Talwalkar (2015), the decision that followed entailed categorization of the passengers based on the time of checking in online. The approach prioritized those on the lower category. The changes translated to the increase in profitability despite minor hitches to the approach of booking.

The new model for adaptation recognized the ability to check platform online has influential in the decision of the passenger. The categorization sought to exploit technology in automating the assignment of seats. Traveler legible to fly could check in on the platform of the airlines as well as affiliates 24 hours in advance. The exploitation of the model continued until 2009 when the airlines terminated association with affiliate sites that demanded a charge of $1 per booking. The innovation of the early-bird check-in followed. The model revolutionized the approach of categorizing traveler as A B and C. Following deliberations on the need to enhance efficiency in the process to ascertain much yield, the airlines formulated the option of the lottery and priority booking. According to the process, the consumer had the privilege of determining the seating position by adding an extra $10 to the normal rates charged in priority booking. Those enrolled for the lottery did not have to remit the amount but participate in a game that presents the opportunity to secure a seat of the choice based on the decision made earlier of booking the airline in advance.

2

Main goal in introducing early bird

The primary goal of the adaptation of the early-bird booking was to present the clientele the opportunity to reserve seats by incurring additional payments that enhances convenience. The airlines aimed at maximizing profits but presenting the decision in a manner that entices the consumers to support the initiative. The approach encourages competition among consumers then exploiting the technological platform in making a decision that appeals to all consumers. The alternatives in the booking sought to increase the level of consumers (Talwalkar, 2015). The approach considered those willing to part with some amount to secure a lucrative seat and those willing to participate in a game of chance that increases the probability of securing a good seat.

The objective in adopting the booking that replicates a lottery is ensuring consumers that the airlines acknowledge their needs even though the approach does not guarantee the desired seat. The commendable aspect of the methodology is that it encourages the exploitation of technology in bookings and such minimizes costs of operation and human error in decision-making. Additionally, the program allowed the airline technological resources the privilege to influence the decision based on consumer’s preferences instead of relying on human judgment (Talwalkar, 2015). The nature of the game complicates affairs to the extent of making it difficult for the consumer to conceptualize its shortcomings. In the long-term, it presents the opportunity to quantify the number of bookings before the flights.

3

Use of game theory

The airlines exploited the game theory for profitability by encouraging consumers seeking privileged seats to remit an additional $10 for the service. The traveler remitted the amount expecting to secure the desirable seat. Those unwilling to pay the rate had the privileges of participating in an open game of lottery that allowed technological apps to assign the clientele seat based on availability. According to the game, the placements of the booking signified the decision to initiate the systems to check the available seats. The prioritization depended on the suggestion of the consumers. The lottery modeled the demands in accordance with the number of participants (Talwalkar, 2015). The person that made early bookings enrolled for the lottery faster before the group that followed. The experiences of those unwilling to remit the $10 differed from that of those remitting the amounts to the airlines on online bookings. However, the model ensured that the airlines have motivated the person to book a ticket either by a lottery of payment of the extra dollar leading to an increase in profitability.

The passenger dominant strategy is the methodology that assumes that a person willing to secure a good seat will automatically remit an additional $10 to the normal charges for the airlines. If the first person to book seeks the early-bird seat, the next person booking ought to part with a similar amount to explore the opportunity of securing a similar seat of the airlines. The end game of the strategy is ensuring that the consumer willing to pay $ 10 for a good seat and the one unwilling to remit the same amounts participates in a game that entices investment in a lucrative seat. Even if each secures the seat or both fail, the airlines earn an extra $10 from the decision of the consumers. The approach of encouraging bookings makes the decision to solicit the good seat the dominant strategy (Mellat & Fini, 2010). The dominant strategy relies on the presumption that the competition among consumers unwilling to pay the extra charge and participate in lottery might persuade both parties to pay the charges on the expectation of gaining an advantage over the other.

The booking approach at the airline also exposes the consumer to the prisoner dilemma. The process is attributable to participating in the lottery while at the same time paying for the privileges. There are occasions where the person commences playing the lottery before resorting to making payments for the desired seat. The unpredictability of the outcome in either option influences the circumstances. Regardless of the alternative chosen, the airline automatically checks in the consumer while creating the impression that the consumer dictates the functionality of the check-in programs. After the decision, the realization that one confronts the complexity in choosing one alternative over another affects the overall process that benefits the airline in the long-term. However, in a context where the consumer has selected two options concurrently, the process of deciding becomes difficult and such constitutes the prisoner’s dilemma (Talwalkar, 2015). The person having two alternatives no longer has the liberty of securing the desired seat because of the urge to participate in an open lottery.

4

Advantages and disadvantages

The advantage of the early-bird- check-in process is that it exploits technology and such incur the airlines minimal costs operating. The decrease in expenses, in turn, increases profitability that serves the interest of the airline. The second advantage of the methodology is that the game is addictive and the more the travelers play the more the profitability to the airlines. The continuation in the undertakings enhances loyalty among consumers making it difficult for the competition airline to cut a share of Southwest airline market. The third advantages of the methodology of booking are that the number of early bird booking keeps rising. Another outcome of the game involving the early bird check-in is that it encourages the prioritization of either method in making bookings among consumers (Raynor, 2011). The repetition in the behavior makes southwest platform popular with consumers willing to exploit online platforms in making bookings.

The disadvantage of the early bird booking process is that the modality encourages consumers to remit charges without the assurance of a good seat, especially in a context where the number of booking surpasses the available seats. The methodology functions if the numbers of bookings are less than 60. However, in most cases, the airline is attracting excessive bookings that makes the strategy loses its significance since the objective was increasing profitability while ensuring consumers choose desired seats on the airplane. The quest for an A boarding seat is not a guarantee in the white bird booking despite the promise that the booking serves the intended purpose.

Recommendation

In a bid to cope with the competition posed by southwest airlines, competitor companies can exploit a model similar to the early bird in encouraging check-in. The modality ought to prioritize technology then customize option for clients using low costs strategies (Singh, Vaibhav, & Sharma, 2018). Those willing to secure good seats should have the privileges of exploring three alternatives with those unwilling to pay extra amounts exploring tow options. Those booking online and walk-in should access similar opportunities but variation should exist for passengers unwilling to pay the extra amount. The person should participate in an open lottery with the expectation of reward points for flying. The airline should in turn accord higher points that translate in privileges accessible to those willing to pay extra amounts for good seats. According to Alamdari & Fagan (2017), the rewards will enhance loyalty that translates into increased profitability from operations. The findings of Singh, Vaibhav, & Sharma (2018) on operation of Indian airlines suggest that low costs approach that exploit technology increases bookings that benefit airlines in the long-term.

Alamdari, F., & Fagan, S. (2017). Impact of the adherence to the original low-cost model on the profitability of low-cost airlines. In Low Cost Carriers (pp. 73-88). Routledge.

Mellat Parast, M., & Fini, E. E. H. (2010). The effect of productivity and quality on profitability in US airline industry: an empirical investigation. Managing Service Quality: An International Journal, 20(5), 458-474.

Raynor, M. E. (2011). Disruptive innovation: the Southwest Airlines case revisited. Strategy & Leadership, 39(4), 31-34.

Singh, V., Vaibhav, S., & Sharma, S. K. (2018). Using structural equation modelling to assess the sustainable competitive advantages provided by the low-cost carrier model: The case of Indian airlines. Journal of Indian Business Research.