Friday, April 10, 2009

Bad operators driving out good ones

A friend who works in a travel agency just emailed me of a new development in the tourism sector. If you do not speak Turkish, in brief: Two leading tour operators have agreed to voluntarily implement a no-hidden-fees policy in their ads, meaning that insurance, airport tax and such will be included in their advertised prices.

While this would definitely be a welfare improvement for consumers, such practices almost always end up with the bad practice driving out the good one, a distinct cousin of Gresham's Law. In layman's terms, unless all operators adopt no hidden charges (my understanding of the news is that while the policy is supported by the Association of Turkish Travel Agencies, it is not mandatory at this stage), the ones adopting the practice will be at an unfair advantage. My friend at Pronto, one of the two leading operators behind the changes, argues that people are not stupid and that when people notice the extra charges, they will choose the no-hidden-charges operators. I agree that you can not fool everyone all the time, but you can definitely fool someone taking a vacation once a year...

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