Behaviouronomics: Selection Bias

In 1987, an investment banker named Steven Rothstein bought a special pass called AAirpass which gave him lifetime privilege of booking first-class American Airlines tickets from anywhere to anywhere in the world for free. The pass wasn’t cheap. It cost him a quarter of a million dollars. But Rothstein was so happy with the deal that in 1989 he paid an additional $1,50,000 to buy a companion pass which allowed another person to accompany Steven in first-class.

One interesting fact about Steven’s companion pass was a clause that he added in his contract about his wife. The agreement stated: “If spouse is the companion, the spouse will be allowed to travel separately from Holder, provided that the spouse travels on the flight immediately prior to or just after the flight taken by Holder.” Steven reasoned that in the unlikely event of a crash, at least one of them would be alive for their three children. It looks like Steven took the idea of risk mitigation too far.

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