(2023-02-15) Zvi M Junk Fees Bundling And Unbundling

Zvi Mowshowitz: Junk Fees, Bundling and Unbundling. Joe Biden harped on junk fees during the State of the Union. While I do not think it is the problem of our time, I take things in the reference class of resort fees, or fees to have adjacent seats on an airplane, and other such unbundling (and bundling) surprisingly seriously. I am putting up my thoughts here so I have a reference to fall back upon.

I frame the core issues differently

More price transparency in these spots is a strictly better equilibrium

Matt talks a bunch about ‘unbundling.’ You used to get your meal and checked bags free with your flight. Now they cost money.

There are at least four advantages to unbundling.

There are also at least four advantages to bundling.

Some general principles here.

If algorithms are sorting or customers are choosing largely via headline price, it is good for everyone to make that headline price reflect true cost.

Where is the role of regulation here? Would bans be useful?

Certainly they are with the ‘resort fee’ style fees that are pure fraud. You pretend to charge me X, then tack on mandatory charge Y after I’ve locked in my choice. This should clearly not be allowed. I do not even understand why one needs a law here at all. To me this should be illegal as fraud, pure and simple, although I know it does not work that way.

Calls for intervention often oscillate between demands for bundling and demands for unbundling, including calling perfectly normal helpful things monopolistic behavior.

Cable companies are forcing you to pay for channels you don’t want. Cable companies are using unbundling to mislead customers and charge extra for basic channels everyone should have. Pick today’s version

Something I realized writing this is that this is not as much a contradiction as it seems. Many of the complaints are the same, only framed differently.

You can’t buy a ticket on United and then seat selection from Delta

If you bundle your printer with its ink, that might be predatory behavior. If you bundle your printer with its ink and then unbundle them to hide that you are doing it, that is worse. (inkjet)

The other other side of the coin is that there is a strong prior that, however much the market might naturally botch something, we should be super cautious about saying ‘market failure!’

I still think that this is probably a place worth an intervention. I think the costs in lived experiences of such failures are high, and the risk of intervention is relatively low.