VARIABLE TICKET PRICING: BASEBALL AS AN EXAMPLE

Background: (1) Sports teams increasingly charge different ticket prices for different
games. (2) The basic reality is that baseball tickets are a perishable commodity. If a
ticket isnt sold for a game! the potential re"enue from that ticket is lost fore"er. The
#uestion is! ho$ can the team e%tract the most re"enue& The ans$er is'''by engaging in
"ariable pricing. (ariable pricing means charging a different price for a game against the
)odgers than for a game against the T$ins. It also means charging dramatically different
prices for tickets located in different sections of the ballpark.
There are t$o conditions necessary for a team to be able to engage in successful "ariable
pricing: (1) the teams must be able to segment the customer market into at least t$o parts
and be able to keep those parts separate* and! (2) the market segments must ha"e different
price elasticities of demand.
The teams $ill then charge higher prices to the customers $ith the less elastic demands.
Scalpers long ha"e understood this $ell and no$ teams increasingly are paying attention.
1) +rofessional sports teams engage in price discrimination. +rice discrimination
e%ists $hen the prices charges different customers are not proportionate to the
marginal cost of producing! selling and deli"ering to those customers.
That is! +1,-.1 / +2,-.2 ! $here 1 and 2 are customers
2) Thus! if it costs the )airy 0ueen 11.22 to produce and sell a chocolate shake!
regardless of the customer! then it is engaging in price discrimination if it charges
3oe 12.22! but 4arry 15.22 for an identical chocolate shake. But! it also can
engage in price discrimination if it charges a higher price for the same ice cream
shake purchased in the e"ening rather than in the afternoon. 6oull recogni7e that
mo"ie theaters often do this'''matinees "ersus e"enings! etc. They dont regard
all performances as the same.

5) The ne$est "ersion of professional sports price discrimination is based upon time
rather than persons. That is! it is not based upon charging different customers
different prices for the same #uality of ticket (say! a bleacher seat) for a particular
game. Instead! they charge any and all customers different prices for the same
#uality of ticket for games on different days! or different times of the day. This is
8third degree9 price discrimination as economists talk label these things.
:) The .olorado ;ockies $ere the first -<B team to do "ariable pricing. They
started in the late =2s. They charge more for games on $eekends and games
against teams such as the )odgers or -ets. They t$eak their prices e"ery year.
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>) The -ets ha"e a four'tiered category for games! based upon $hom they are
playing! the day of the $eek! and the time of the year. ?n 8upper reser"ed seat9
no$ goes for 1@! 112! 11:! or 11A! depending on these circumstances.
a) The -ets actually cut prices bet$een B and 55 percent for 1A lo$'demand
games* kept prices the same for 2B games* raised prices bet$een B and 1A
percent for 21 games* and 1B to 55 percent for 1B games against the
6ankees! etc.
b) But! $hat if the -ets charge a premium to see Barry Bonds! but then the
-ets $alk himC&
A) The 6ankees attendance declined a bit in 2225. They began to offer upper deck
seats for only 1> for eight games against nonprime opponents.
B) The Bra"es and Diants simply charge 1: more on $eekends.
a) The Diants estimated they earned 11.2 million more in re"enue.
@) 0uestion: Ehat should be done $ith season ticket holders& The .ubs included
all of these changes in their season ticket prices. So did the -ets. The Diants
did not. But! the Diants $eb site pro"ides the means for season ticket holders to
sell their tickets to other indi"iduals. For some games! bidding really dri"es up
these prices. In effect! its a legal auction.
a) Gn the other hand! the Diants allo$ their season ticket holders to sell their
tickets on a Diant'appro"ed organi7ed site.
b) The .ubs ha"e found a $ay to gain lots of the re"enue scalpers other$ise
$ould recei"e. The Tribune .orporation o$ns ticket brokerages near
Erigley Field. There! a 1:> ticket for a game against ;oger .lemens and
the 6ankees might be sold for 11!>22.
c) The .ubs say they are protecting fans from phony tickets! stolen tickets.
True! but theyre also gaining the re"enue scalpers used to get.
=) Ehen one obser"es large amounts of ticket scalping occurring! this often is a sign
that the teams ha"e not priced their tickets appropriately. That is! their prices
dont reflect market conditions. Sometimes such conditions cant be anticipated!
as $here a game turns out to be crucial $hen it $as thought to be a dud a fe$
$eeks pre"ious. 4o$e"er! some of these circumstances can be anticipated.
12) 6et! e"en if teams cant predict the demand for particular games as $ell as they
$ould like! economically speaking theres no reason $hy they shouldnt use
auctions and similar de"ices to $ring more re"enue from the market. H.g.! $hy
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shouldnt the SF Diants put some sought after tickets up for the highest bid&
Some customers might be unhappy! but others $ould be ecstatic that they could
obtain a ticket! if they really $anted to attend a particular game.
11) Eho is inIured by scalping& Jo one. It is a "ictimless crime. Its not clear $hy
it should be against the la$. The la$s against scalping generally ha"e been
promoted by teams (or theaters) $ho resented the fact that someone else $as
making re"enue from their products.

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