Legroom on airplanes is a precious commodity, and how we determine who gets it can teach us a lot about how people bargain, argue Slate economics bloggers Christopher Buccafusco and Chris Sprigman.
Fistfights have broken out over the "right to recline," and people are divided over who has the best claim to the limited legroom. Buccafusco and Sprigman say the controversy is merely a question of how to divide scarce resources—and ran experiments to determine who is in the right.
Dealing with scarcity
Nobel Prize-winning economist Ronald Coase argues that, when distributing scarce resources, the party that gets them first is less important than the negotiations that come later. As long as people can bid freely, the person who values the commodity more will purchase it. Everyone goes home happy.
Sometimes transaction costs, like social norms against talking to strangers, prevent negotiation and result in an inefficient distribution of resources. In these situations, Coase says the solution is to give resources (in this case legroom) to the people who will value them more.
The authors surveyed people to see how much they would pay for either the right to recline—or the right not to be reclined upon. In some transactions, respondents were told there was a preexisting "right to recline," and the front passengers could choose to sell their right. In this scenario, front passengers wanted $41 on average to stop reclining, but back passengers would only offer $18 dollars. Front passengers won the day: they would stop reclining only about 21% of the time.
But the researchers found a surprising result—flip the premise, and the results flip, too.
In other transactions, the initial situation was reversed: participants were told they had no such right to recline, and back passengers could choose to sell their legroom. This time, front passengers only offered $12 for permission to recline, but back passengers wanted $39. Despite the high value front passengers placed on leaning back in the first scenario, they now stopped reclining 72% of the time.
Negotiators who started with a presumed right to the legroom valued it more, at $41 versus only $12. This phenomenon is called the "endowment effect:" people who get something by default value it more than if they had purchased it.
In either case, negotiating is preferable because it satisfies more people. But Buccafusco and Sprigman hypothesize that the awkwardness of offering a stranger money imposes a transaction cost that prevents negotiations. And neither front nor back passengers valued the space more across all transactions. So who wins?
Buccafusco and Sprigman suggest a potential solution: avoid money, and offer a gift instead. Participants were more comfortable offering someone a cocktail or snack not to recline than they were offering cash, and would-be recliners said they would accept 78% of the time (Buccafusco/Sprigman, Slate, 9/23).
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