Spirit Airlines Combats the Tragedy of the Overhead Bin

As any frequent flyer knows, the competition for overhead space is tight. As I noted a few months ago (“The Warped Economics of Carry-On Luggage“), the situation has only become worse since airlines started charging fees for checked luggage. Budget-conscious travelers caught on quick and started carrying on more of their luggage.

In economic terms, the basic problem is a lack of property rights to overhead space. Without those rights, there is a tragedy of the commons as travelers try to grab space before their fellow travelers (just as some guacamole eaters compete for appetizers). Particularly egregious? The passenger in row 35 who brings on two over-sized roller bags and stows them in the overheads around row 15. No, I’m not bitter.

One solution to this problem would be to create property rights to overhead space. But that would be hard to operationalize.

Another possibility–which Spirit Airlines announced today–would be to charge for carry-ons. Spirit announced:

In order to continue reducing fares even further and offering customers the option of paying only for the services they want and use rather than subsidizing the choices of others, the low fare industry innovator is also progressing to the next phase of unbundling with the introduction of a charge to carry on a bag and be boarded first onto the airplane.

The carry on fee ranges from $20 to $45, the same or more than the fees for a single checked bag (fees for multiple bags may be higher). Personal items (i.e., the things you put under your seat) remain free.

Note how Spirit frames this as helping the airline reduce fares. In the future, I hope some enterprising economist studies the different bag pricing approaches that the airlines use to see to what extent higher bag fees–checked or carry on–translate into lower fares and either more or less crowded overhead compartments.

7 thoughts on “Spirit Airlines Combats the Tragedy of the Overhead Bin”

  1. I love examples of practical microeconomics. Just reminded of “Murder on the Margin” (1978), a fun economics read.

  2. That’s HYPERINFLATION — an increase in price that does not reflect any true product or service, including paperwork costs. It means they slit their own throats, not because people are angry, but because they cannot afford it. They’ll instead axe the trip when possible and seek alternatives.

  3. People, the airlines are not reducing fees by the amount you pay for checked bags now. Nor will they reduce fees if they make you pay for carry on luggage.
    The CEO’s, CFO’s, COO’s, and other executive’s will, however, be able to buy another house somewhere, send their wives on more extravagant shopping trips around the world, and now have millions more for their own personal retirement-not their employees.
    The fleecing of America continues…….

  4. I’ve never flown Spririt Airlines. Now I never will. It is not reasonable to assume that someone traveling far enough to fly to will have “nothing” to take along. I accept the rationale of charging for checked bags. I draw the limit at charging for carryons. Having said that, I am all for enforcing the “rules” regarding carryon numbers and size. Trains and cars are looking better and better everyday, given the long preflight check-in times, the hub structure with common multiple layovers and plane changes to micro planes for final legs, and the cost of car rentals upon arrival. Passengers aren’t stupid. They will begin (and already have begun) to tally these add-on fees and are opting more frequently to meet by internet, or travel by car instead of being nickle and dimed by the airlines, that can’t seem to simply charge reasonable fees and stick with them, instead of driving oneanother into bankruptcy under phoney competition schemes.

  5. Instead of huffing and puffing…simply avoid Spirit totally for a few months, until they drop (or modify) this new surcharge on carry-on luggage.
    I agree with limiting the size and weight of carry-ons, but to charge such a stiff fee is prohibitive.
    Fly another airline.

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