Most airlines now charge for checked baggage, with a few notable exceptions. However, I am aware of few airlines that will charge you for carrying your bag on the airplane (Spirit is the only American one I can think of). I think we have all been in "seating area 4" or some other horrible position, and watched the overhead bins fill up with rollerboards as we make our way back to our seat in row 35. This happens, of course, because nobody checks anymore.* This happens especially on domestic flights as these are presumably trips that are shorter in duration. So why don't people check? The obvious answer is that it is no longer free, which surely plays a large role. But these are not the only costs of checking a bag. Off the top of my head, you have: 1) wasted time and 2) not being close to your luggage/risking theft/etc.
So even prior to the baggage fee, there were costs associated with checking. Of course, there are costs associated with carrying on as well. These include: 1) limited size of baggage, 2)having to carry/roll/drag your bag around the airport, and 3) restrictions on liquid.
Thus, the true cost of checking a bag (or carrying it on) is not the fee but the below equation:
Fee + inconvenience cost = cost of carrying on/checking.
How that second variable is determined depends on all kinds of observable and unobservable inputs. How long is your trip? Are you a light traveler? Do you have a lot of large liquid things (or just one) to bring along? What value do you place on not waiting around for your bag at the airport afterward? Do you have other valuables in your baggage that you don't want to check?
Before the institution of the checked baggage fee, that first element was zero, and travelers basically had to weigh the pros and cons of checking and not checking. Now, however, the scales have been tipped. The traveler makes the following comparison:
inconvenience cost of carrying on <> checking fee + inconvenience cost of checking
It's abundantly clear that for the vast majority of people, the left is smaller than the right, and so they carry on. Of course, carry ons are free to the traveler, and thus the airline does not get to monetize the inconvenience cost of carrying on.
Spirit's structure is interesting, they actually charge more to carry on than to check. This levels with what I would have assumed, that the inconvenience cost of carrying on is lower than the inconvenience cost of checking.
That's interesting, but one would have to know more about airplane economics than I do to know how best to price it. I guess the way to price it would really come down to what the airline wants to do. Right now, it seems like they want everyone to carry on, but that seems inefficient. They can carry cargo/mail/etc., yes, but they are already forced to leave what I can only assume would be a significant amount of space in the cargo hold; if the overhead bins fill up and they have to check more bags, they need room for that. Also, have you ever heard of anyone not being able to carry on because they ran out of space? Maybe they add bags and then fill in the rest with cargo and mail, I have no idea, but then they have the reverse problem of making sure mail gets where it's going on time.
So what's holding them back? It's not like you have options. People like to think they have flight options, but they really don't. I live in Denver. If I want to fly somewhere, I pretty much have the option of United, Frontier, or Southwest. Since I hate Southwest, that leaves me with two options. United flies everywhere and Fronter/Southwest do not. So sometimes I have options of one or the other airline, but not regularly. People have the option to fly Southwest and not pay to check their bag, and yet many people do not fly Southwest because maybe they hate not having a seat assignment or Southwest doesn't go where they're going. Anyway, you might technically have options, but they are probably limited. Airlines have what I'm going to term a "semi-monopoly." Even if United doubled their fares overnight, some people would still fly them, because they wouldn't have a choice.
More importantly, airlines copy each other. When they started charging for checking, they all did it before long. So far, the only airline to charge for carry ons is a fringe regional airline. Imagine what would happen if Delta started to charge for carry ons tomorrow, how long would it take before others copied? There would be a backlash, yes, but as I said, it's not like you can choose to fly another airline (for the most part) or just stop flying altogether.
In conclusion, I don't know why airlines don't just start charging you to carry on. It's pretty much the only service they still give away, and it is a valuable one at that. Do I want them to? Of course not, but my inconvenience cost of carrying on is pretty high, so I would probably still do it. But I don't really understand why they are reluctant.
(Aside: There are numerous other ways airlines could charge you more. For instance, they could institute some scheme by which you could pay to have your bag come out of the tunnel first at baggage claim. Or maybe you can pay to "reserve" a spot for your carry on on the plane, to eliminate the chance that you have to involuntarily check it. So why don't (most) airlines do this?)
*not exact figures
