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A recent unfortunate event that took place on a United Airlines flight provides what economists call a “natural experiment”that can help show how well economic theory performs in the real world. The event, in which a passenger was randomlyselected to be bumped from a United flight after he had been seated and was subsequently forcibly removed from the aircraft,resulted in a viral video and a wave of negative publicity for the airline. Economists would expect a strong wave of negativepublicity to affect demand for United’s services. Morning Consult, a media and polling company, set up a polling experimentthat tried to determine the impact of the negative publicity. Read the article “How Much Would You Put Up With to Avoid United Airlines” from the New York Timesand then answer the questions:
a. How did the polling company test the impact of negative publicity of United? What results did the polling company obtain?
b. What cautions does the article give about interpreting the results of this experiment? Which of these cautions do you think are the most important? With these cautions, do you think the results of this experiment are credible?
Expert Answer
a. How did the polling company test the impact of negative publicity of United? What results did the polling company obtain?
The experiment presented respondents with a pair of flights and asking them which they would choose if they were flying from New York to Chicago.
One option was with United and the other with American Airlines.
- The same situation was tested with several filtered parameters like:
- The two flights were identical in every respect, flying nonstop for about three hours, at a cost of $204.
- The American Airlines flight had an extra layover
- The American Airlines flight cost $66 more
- The American Airlines flight had a layover and cost $66 more
- The obtained result were:
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Percent of survey respondents picking United subject to the following Among people who had heard of United recently Among people who had not heard of United recently Difference The United and American Airlines flights were identical 21% 49% 28% The American Airlines flight had an extra layover 43% 73% 30% The American Airlines flight cost $66 more 51% 81% 30% The American Airlines flight had a layover and cost $66 more 56% 86% 30%
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b. What cautions does the article give about interpreting the results of this experiment? Which of these cautions do you think are the most important? With these cautions, do you think the results of this experiment are credible?
- For a casual airline traveler with no brand loyalty, we could expect this decision to come down to a coin flip, and for those who said they had not heard of the United scandal, it did: 49 percent chose the United flight, and 51 percent chose the American flight.
- The hypothetical choice did not actually make respondents spend real money, so the responses in real case might vary
- Aversion fades quickly
- If repeated after some time It’s possible consumers will turn their attention to something else
Of these 2nd one is the most important. With these caustions it is clear that the result is credible but not ong lasting there are several factors that determine the actual results. But at the same time these results will be short lived as the impact recedes the choices are determined more by price and loyalty is not deep rooted.
