Wednesday, October 21, 2009

Report: Lower Ticket Prices for Women's Basketball is Due to Institutional Sexism 

From the Chronicle of Higher Ed.:

"Colleges charge a premium for admission to see males play, even when women's basketball teams are ranked as among the very best performers in the nation," write the authors, Laura Pappano and Allison J. Tracy, both of the Wellesley Centers for Women. By charging less for admission to highly ranked women's games, the authors say, athletics departments engage in "institutional discrimination that is camouflaged as sensible economic practice."

The report analyzed ticket prices at every level, from single-game to season tickets, at 292 Division I colleges. The results showed that ticket prices for women's games lagged far behind those for men's games at the same institution at all of the top 25 women's basketball programs in the country—even at colleges where the men's team ranked lower than the women's team.

Here is the abstract to the report.

Tickets to college sports—and men’s and women’s Division I college basketball in particular—may appear on the surface no different than tickets members of the public may buy to attend professional sporting events. But unlike professional franchises, colleges are non-profit organizations and, in many cases, public institutions. Decisions around ticket prices do not reflect an actual marketplace, but internal calculations and decisions that necessarily reflect a value placed on the event by the institution. This distinction is critical because previous research shows that lower-priced events are perceived as lower quality and less worth watching or attending. Our review of ticket prices for men’s and women’s Division I college basketball for the 2008-2009 season considered entry fees charged by 292 institutions at various seating levels, including season ticket packages and single game tickets. Our results showed significant gender gaps at every pricing and seating level with colleges charging a premium for male play. This gap persisted even among teams identified by the NCAA as top-ranked women’s teams with large fan followings. Analysis of attendance figures further showed that the gender differential in price across schools is not accounted for by differences in attendance. Because athletics, and particularly college basketball, have an increasingly prominent cultural profile, the practice of effectively de-valuing women on the court has implications off the court as well. The results support the broader contention that women athletes—as women in traditionally male arenas—continue to face institutional discrimination that is camouflaged as sensible economic practice.

I do not doubt their findings, but I wonder if they took into consideration something: that basketball fans are more willing to buy men's tickets than women's tickets, and not because of sexist attitudes. Perhaps, just perhaps, sports fans find men's games, on average, more exciting to watch than women's games.

I wonder if the authors asked themselves this question: why would those in athletic departments be willing to "leave money on the table" to feed their sexist attitudes? They note themselves that top-ranked programs tend to charge less for women's games than men's games. If fans are willing and able to pay the premium, why aren't they charged the premium?

One "solution", if you want to call it that, would be to force all colleges to charge exactly the same price for men's and women's ball (and to not set lower prices for men's games). Then let's see what happens to attendance at women's games.

Here's Stacey Brook with a similar take that it is the demand side of the market that the authors of the paper are ignoring.

Cross-posted at Market Power

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Wednesday, October 07, 2009

Fans as Inputs 


After last night's Twins/Tigers game - helluva game, no? - the announcers for TBS mentioned that the fans played a big part in the Twins win. 54,000 Twins fans hollering and waving their rally towels would have been impressive to see.

This isn't the only time that fans have been noted as an important part of the game. Texas A&M officially calls their student body the 12th Man, and the team honors one of its players by having him wear the number 12. Basketball teams call their crowds the 6th man because of their effect. Gary Pinkel, the university of Missouri coach, has asked his team's fans to wear gold to tomorrow night's game against the Nebraska Cornhuskers. The last time this happened, Faurot Field in Columbia looked like grass meadow surrounded by maples turning color in fall: bright golds with reds interspersed throughout.

I'm the guy in the gold at the top of the picture.

There are a lot of things unique to the sports industry that make it interesting to economists. For instance, unlike other industries, a monopoly position is impossible to hold because the product is competition and, well, it takes two to tango (Billy Idol excused).

Another quality is that the consumer of the product can also be thought of as an input. I know that this has been mentioned in the research Cairns, Jennett, Sloane (1986), but I haven't seen it discussed much. So I ask you, Sports Economist readers and co-bloggers, this: if fans are indeed both consumers and inputs, what are some of the qualities we should see in sports that we would see if fans were mere consumers.

In other words, suppose two theoretical models were built to explain a sport, say baseball. One of the models treat fans as simple consumers and the other model treats fans as consumers and inputs, what would be the difference in terms of the results?

Here's one off the top of my head: inputs are paid for their effort. Consumers pay for their products. My sense is that ticket prices would be lower than if fans were merely consumers and not inputs.

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Friday, August 14, 2009

MLB Postseason Ticket Pricing 

I am spending the weekend in the NYC area, so the New York Times is my local paper for the next couple of days. I came across an interesting tidbit in the NY edition of the paper this morning.

With the Yankees playing well, Bombers fans are already anticipating October baseball this fall. The Yankees will soon be releasing their postseason ticket prices, and given their track record on pricing, people are anticipating an expensive postseason. Of course, the price elasticity of demand for postseason games is very low, so teams can raise their prices quite a bit. Yankees' fans clearly understand that:

“I don’t think they will raise prices too much because of the backlash they got on the regular- season tickets,” said Michael Bahn, a season-ticket holder since 2003. “The problem is, for the playoffs, they have you over a barrel and you really want to go.”

For me, the interesting information in the article is that MLB sets guidelines (a price ceiling) for the first two rounds of postseason ticket prices. I'm no antitrust expert, but, absent the infamous MLB antitrust exemption (the gift that keeps on giving), that sounds like a per se violation of the Sherman Antitrust Act to me.

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Saturday, May 16, 2009

Tracking Changes in MLB Baseball Attendance 

Baseball-Reference.com has a handy page (HT to JC Bradbury) where they are tracking changes in MLB team attendance. It calculates overall attendance, per-game attendance, and comparisons between this year and last year. It also allows you to sort the data and it allows you to display the data in csv format for copying and pasting into your favorite spreadsheet.

As of yesterday (May 15th, 2009), teams as a whole have seen per-game attendance drop by about 5%. While the Yankees, as usual, are garnering most of the headlines (especially with their $2,500 dollar a game seats), the Mets, Nationals, and Tigers all have seen steeper declines in average attendance.

Nine teams have realized attendance increases with the Tampa Bay Rays leading the way. That's not at all surprising given their success on the field last year. Studies routinely show that when teams perform well one year, their attendance tends to be higher the following year because the good performance changes fan expectations, ceteris paribus.

The recession is surely hurting teams. Both the Mets and the Yankees have moved into new palaces, which should ceteris paribus translate into attendance increases, but both rank in the top 4 in per-game attendance decreases with the Mets seeing the sharpest decline so far.

As I metioned above, a lot of attention has been given to the pricing policies of the Yankees. It certainly is possible that they erred when setting ticket prices, but without digging deeper into the numbers, it's hard to say how much of the decline is due to factors such as weather, the recession, poor pricing policies, team quality, changes in capacity, etc. The Yankees' new ballpark has a capacity of 51,800 while the old Yankee stadium had a capacity of 57,545. The Mets' new ballpark has a capacity of 45,000 while its old ballpark had a capacity of 55,601. Surely this is one of the factors that explains why fewer fans are attending Yanks and Mets games this year.

Cross-posted at Market Power.

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Wednesday, March 11, 2009

A Report From the Cutting Edge 

This just in: remember that image of baseball front office types as slow-witted dinosaurs who had to be dragged kicking and screaming into the twentieth century by Michael Lewis? Forget about that - MLB has jumped right onto this newfangled analysis bandwagon. According to a recent Bloomberg article, the Cleveland Indians have developed a brand-spanking new cutting edge ticket pricing system. Compared to other MLB clubs, who may be pricing tickets after consulting the Oracle at Delphi and examining pigeon entrails for all we know, the Tribe hired a consultant to statistically analyze their past three years of attendance data. Based on this cutting edge analysis, the Tribe "learned that fireworks after a game draw an additional 4,000 fans; every one-degree temperature drop below 70 Fahrenheit costs them 300; and when the New York Yankees come to town, attendance jumps 11,000." If this article is to be believed, the Indians are the only team in MLB doing this sort of analysis of attendance.

Among the other fascinating details uncovered by this cutting edge statistical analysis include that "...when children are on summer break, attendance increases 1,200; if rain is in the forecast, it falls 2,200; a bobblehead-doll giveaway brings in 4,700 people..." It's too bad that nobody in the Indian's front office thought to read "Does Bat Day Make Cents?: The Effect of Promotions on the Demand for Baseball" by Mark McDonald and Dan Rascher (which was published in the Journal of Sport Management almost ten years ago), because they could have saved the consulting fee. Most of that information is in Mark and Dan's paper.

Hat tip to Bryan Goodall.

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Wednesday, December 10, 2008

More on Using the Airline Model of Pricing to Price Tickets 

Matt Phillips at a Wall Street Journal blog called "Middle Seat Terminal" takes up this TSE post on the San Francisco Giants using the airline pricing model:
Granted this is just an experiment, and maybe selling seats in a stadium isn’t radically different from selling seats on an airplane. But with technology developments such as RFID — radio-frequency-identification chips that, among other things, let retailers and warehousing operations keep close tabs on inventory — you wonder how far “dynamic pricing” could extend into our everyday lives. Someday, will the grocery store raise the price of bananas based on how many fruits remain on the shelf? Or will the bus driver charge a different fare depending on how many riders are aboard?
Technology has already changed how teams view scalping. Now that they can get a piece of the action with scalping, the secondary ticket market doesn't look like such a bad idea now. What's next in store for ticket pricing?

Cross posted at Market Power

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Thursday, December 04, 2008

Baseball Teams to Use Airline Pricing Model 

From Darren Rovell:
In 2002, while I was still at ESPN, I was asked to do predictions for the following year. When I predicted that more teams would institute variable pricing, I don't think I was going too far out on a limb. But when I said "the sports world could eventually adopt the airline practice" of price fluctuation, I was definitely ahead of my time.

Six years later, the San Francisco Giants are going to bring airline pricing to sports. The walk-up sales for hundreds of seats for each of next season's home games could dynamically change, based on supply and demand.

Brokers have done it forever, but teams haven't taken a shot at it. But the weak economy probably forced the issue, as teams are now going to look to get the most bang for their buck based on true market factors.

This only makes sense, but I'm skeptical that the weak economy had much to do with it. Because the marginal cost of letting fans into a stadium is zero when attendance is below capacity, it only makes sense to broker deals with fans in order to maximize revenue (and profits). This is true in good times and in bad.

HT to student Chris Kaufman

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Thursday, November 20, 2008

No Price Discrimination Here 

Despite their non-profit status*, university athletic departments price their tickets using strategies like the pros do. For one thing, they practice price discrimination. Students get cheaper tickets than the general public and alumni and they don't have to donate to the athletic departments. At some schools, students get poorer seats, so price discrimination isn't the only factor explaining the price differential. But at the University of Missouri, students get prime football seating in the east stands, right across from the alumni. So Mizzou's pricing strategy is largely price discriminatory.

But according to this article, the university is not using price discrimination in pricing tickets to the Big XII championship game, meaning student tickets will be priced at the same rate as the general public. An explanation for this is that because of the uniqueness of the event, students and the general public have the same demand, on average, for the game.

*Being non-profit does not mean that you don't have profits as an objective. All it does is restrict what you can do with earned profits, meaning that they can't be dispersed to shareholders. As I was told at a meeting when I jokingly brought up the fact that my university is a non-profit, I was told by an older gentleman at my table "Oh, we get plenty of profits. We just make sure we spend it all."

Cross-posted at Market Power

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Wednesday, October 01, 2008

Football in Dixie 

After my futile attempt to secure tickets to the USC-Ohio State game (Ticketless Trojan), a friend passed along a copy of Dixieland Delight: A Football Season on the Road in the Southeastern Conference. It's not exactly Grisham or Faulkner but provides insightful and humorous observations ranging from the pre-game culture and rituals to comments on "Bama Bangs" (male adolescent hair styles of AL fans). On funny excerpt on the relative confidence-insecurities of Georgia fans in the run-up to the 2006 Tennessee game in Athens :
"... as we cross the campus a Georgia fan approaches me and syas, "I just want to go ahead and congratulate you on kicking our ass." Then he shakes my hand. The Georgia Bulldogs are the defending SEC Champions, yet, based on their fans, you'd think that they were Vanderbilt about to kick off against the Chicago Bears."
DD's author, Clay Travis, relates ticket purchasing experiences on gameday on each campus. In all cases, tickets were available. In seven of the eleven cases with data (AL-AU seemingly not provided), he secured tickets at or below face value (UK-GA, Ole Miss-MSU, VU-SC, AR-AL, MSU-AU, TN-Cal, LSU-UK) and one slightly above (AU-LSU). The games substantially above face value include GA-TN, SC-TN, FL-SC. The ease of tickets at quality games (AR-AL) or rivalry games (Miss-MSU) likely owes itself to the size of the stadiums relative to the fan population base. Highest price (GA-TN at $100/ticket) involves high quality teams with relatively close proximity, relatively close to the South's largest metro area. Of course, the availability of tickets leads back to my question of the lack of them at the Trojan game. (Additional insights on ticket markets appears in the Boston Magazine, quoting one of the sports econ crowd, Craig Depken.)

DD also draws out socio-economic and cultural contrasts to my USC adventure. Twenty- and thirty-somethings dominate the USC fan base. I would estimate fewer than 10% were older than me (47) with hardly any below college age. In contrast, from both my experiences and Travis' book, the SEC demographics include a much wider dispersal of ages both on the low and high ends. Why such a difference? The SEC v. USC games reflect differences that others have noted about places such as Chicago's U.S. Cellular Field versus Wrigley Field (affluent 20s and 30s). No doubt, the alumni base from a relatively small private institution differs from that of large, public institutions in terms of affluence, and this may but why the age differences?

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Friday, July 25, 2008

Downsizing 

At Baseball Prospectus, Nate Silver provides a thorough analysis of the downsizing of Major League Baseball stadiums in recent years. (Silver's piece is free until 7/27, gated thereafter). I'm struck by two things. New stadia have almost 10,00 fewer seats, a considerable decline. Yet the trend in the English Premier League is the reverse - the top clubs adding a significant number of seats to their stadia. Second, Silver mentions an problem at Wrigley Field which strikes me as moderately serious: "Wrigley Field’s bathrooms can require an inning-long trip once everyone has had their fill of Old Style, and it can take 15-20 minutes to exit the ballpark from the upper deck." In light of yesterday's post on unitized ownership of the Cubs and Wrigley, if this issue is as serious as Silver makes it sound, why hasn't ownership addressed it? (On second thought, I suppose waiting for the subsidy solution applies here too.)

Here the reasons offered by Silver [numbered by me] for why downsizing makes sense in MLB:
1) Firstly, although the number of seats has few theoretical constraints—there are soccer stadiums in Latin America and college football stadiums in the United States whose capacities exceed 100,000—the number of desirable seats is limited. Baseball, more so than football or soccer, is a game that loses a lot when viewed at a significant distance, and particularly when the pitcher-batter confrontation cannot be watched adequately. Dodger Stadium is probably fairly close to the theoretical maximum of "good" baseball seats at 56,000, and more modern facilities will eat into that number by using space on luxury boxes and the like.

2) The availability of cheaply-priced seats might cannibalize one’s market for premium seats, as fans may purchase the cheapest seats available and attempt to 'upgrade' them later. Although such strategies can be combated by hiring ushers or creating firewalls between different parts of the stadium, this may make the ballpark experience less pleasant for fans going to and from their legitimately-purchased seats.

3) Teams are increasingly able to reap the benefits of price discrimination by introducing tiered pricing schemes, and by participating in the resale market through partners like StubHub. Therefore, they can recoup some of the loss stemming from excess demand by charging higher effective ticket prices, without having to bear the negative public relations impact of higher face values.

4) There are some marginal costs associated with each additional fan that attends the game, such as security and janitorial services. The price of such services is trivial in comparison to premium seats that are booked at $50 or $100 each, but become more tangible as compared to the cheap seats.

5) In addition, higher seating capacities can create additional congestion both in and around the ballpark, making the experience less pleasurable for all those that attend. Indeed, some existing stadiums are not especially well equipped to handle a capacity crowd. Wrigley Field’s bathrooms can require an inning-long trip once everyone has had their fill of Old Style, and it can take 15-20 minutes to exit the ballpark from the upper deck.

6) Larger seating capacities may require a larger ballpark footprint, and therefore higher rents or land-purchase prices.

7) The easiest place to add seats is usually in the outfield, but this may impair aesthetics by blocking views of city skylines or natural landmarks.

8) Stadiums with empty seats look less attractive on television—the importance of which should not be understated.

9) In addition, stadiums with empty seats may create a less intimate experience for people at the ballpark, thereby potentially reducing demand. Baseball tickets may be what is known as a "mob good", in which there are mutually-reinforcing, positive externalities conveyed by crowd behavior. To limit the number of seats is arguably to select out the most intense and passionate fans, who are (within certain boundaries) good fans to have sitting around you.

10) Limiting the supply of tickets may create a greater endowment effect (basically, a sense of ownership) for those fans who do hold seats, thereby increasing the amount of repeat business and encouraging fans to purchase season tickets.

After having articulated all of this, you might conclude that I think teams like the Mets are making the right economic decision by substantially reducing their seating capacities, but I do not. I think it may be the right near-term decision, but I do not know that it is the right long-run decision. By limiting their number of seats, a large fraction of which will be occupied by season ticket holders, corporate clients, or fans that are wealthy enough to pay above-face prices to scalpers and brokers, teams risk shutting out a large fraction of their fan bases from the ballpark experience.
Reasons 4,5, and 6 make the most sense to me, particularly in light of the move back towards the inner city, where land prices are higher. I'd not thought about the issue of spending resources to serve and monitor $5 seats, when more lavish attention to the $50 seats might pay higher dividends. I'm with Silver on the future costs of high current prices though. There is so much televised sport now, that I'm not confident that baseball (or basketball, for that matter) on television will generate the fan base like it did when there were only three channels on the dial.

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Friday, July 18, 2008

Just like the airlines 

MLB will set a new attendance record if current figures hold up through the second half of the season. Given high gas prices and shaky consumer confidence, this is somewhat puzzling. One factor that might help account for this is an increasing use of discounts and promotions. Here are some snips from an article on demand for sports in Atlanta:
The Braves recently added to a long lineup of discount offers, which range from two-for-the-price-of-one outfield seats to four-game packages that come with $25 gas gift cards.

...The Braves' Eurton said the team's most successful discount offer has been a "stay-cation" package that offers tickets for a game and up to four other Atlanta attractions — the Georgia Aquarium, Stone Mountain Park, World of Coca-Cola and Six Flags. Savings are as much as $52.99, or 37 percent, depending on how many attractions are chosen.

...Eurton said the Braves were "ahead of the curve" with value-added packages in the past — such as their two-for-one Tuesday tickets and all-you-can-eat seats — but developed more such offerings this year. Because of the state of the economy, "I think fans are paying more attention to what we have to offer," he said.
A stadium has something in common with an airplane: filling a seat with a fanny has very low marginal cost, so it makes sense to price discriminate like crazy to get them filled. That's what the airlines do. The trick for baseball teams is finding creative ways to do it. If the Braves are in any way typical, the increased use of promotions may have something to do with record ticket sales, but not record demand.

On a related note, consider this information on the NFL's Giants pricing scheme, where seat licences at the new stadium are going for $1,000 to $2,000. From Sandomir at the NY Times:
Even before the Giants released their pricing plan, which has 10 options, fans were resigned that they had to buy licenses, which guarantee the right to buy and control their season tickets — or lose their places in the new building.

John Moss, of Roseland, N.J., learned that he would be paying $5,000 each for his four front-row, end-zone seats at the new stadium. “It’s difficult to afford,” he said, “but I’m better off than the guy at the 40-yard line in the 27th row who’s paying $20,000.”

It would cost $80,000 for four seat licenses and $28,000 a year to buy the tickets in the field level behind the Giants’ bench, which will become an elite Coach’s Club in the new stadium.
There's no sign of recession in those figures.

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Saturday, March 22, 2008

PSLs in NYC 

They played in Charlotte, and now it's time to see if they'll play in the Big Apple. Personal Seat Licenses (PSLs) will be used to finance the construction of the new football stadium being built by the Giants and Jets in New Jersey, according to an article in the New York Times.

In economic terms, a PSL is a two-part tariff, where fans pay an up-front lump sum fee for the right to purchase tickets at face value. The PSL allows the team to capture some of the consumer surplus it generates. PSLs were first used to finance stadium construction in the early 1990s by the Charlotte Panthers. Since most PSLs are put in place when a new facility is built, and no new sports facility has been built in NYC in decades, this is the first opportunity for a New York team to implement them.

The key issue is how much the Jets and Giants will charge for a PSL. Historically, teams priced PSLs under $10,000. But Jerry Jones upped the ante last year when the Cowboys priced their PSLs between $16,000 and $150,000 in their new facility that is scheduled to open in 2009. Will the Jets and Giants feel the need to keep up with the Joneses?

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Wednesday, December 12, 2007

Electronic Ticket (Re-)Sales 

TMQ's Gregg Easterbrook, after a sensationalized introduction, asks an interesting question:
On Monday, sellers on StubHub were asking from $750 up to a rather comical $164,710 for tickets to the Ohio State-LSU game (the latter price is for a prime luxury-box seat). The season finale Giants-Patriots NFL game might be historic; on Monday, sellers on StubHub were offering tickets for $200 up to $26,000, depending on seat location or box quality. Once the NFL playoff pairings are known, scalper Web sites will come to life for those contests, too. The asking price is not always the selling price, of course. But bowl committees and NFL teams must be saying to themselves -- if these seats really are worth hundreds or even thousands of dollars on the free market, we should be the ones pocketing that scratch. How long will it be until professional teams cut out the middle person and simply auction off tickets for whatever the market will bear?Any day now, the NFL is expected to announce a deal to affiliate all its teams with one online reseller, probably Ticketmaster or StubHub, formally acknowledging reselling as legitimate and bringing the NFL an expected annual fee in the $20 million range. This might be just the first step in converting sports-ticket selling into StubHub World.
If one thinks of tickets like shares of stock, it is unlikely that franchises will initially place 100% of each season's seats by an electronic auction mechanism. But what percentage will be "placed," and what percentage will be auctioned?

I think rich people in particular are willing to pay to sit in the same spot ("their" seats in some sense) near others that they recognize. The latter component may be modest, but it might also account for the some of the interest in prosecuting scalpers in the old days. Legal reselling increasingly puts that component at risk. This is a stretch, but one way of interpreting laws against scalping is that clubs didn't mind you selling tickets to your friends, just any old high bidder.

One can debate the purpose of anti-scalping laws, as the economic literature has done for some time without a clear resolution. But what is clear is that electronic exchange mechanisms are leading to the repeal of these laws. The rise and fall of scalping laws is an interesting question in political economy. Easterbrook's piece provides a few useful anecdotes in that regard.

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Wednesday, November 28, 2007

Ticket Scalping in Missouri - Now It's Legal 

In Missouri, ticket scalping at prices above face value is now legal..

And there was some rejoicing (and economic development???).

To wit: Hal Wagner, owner of Ace Sports & Nationwide Tickets at Oak Park Mall, already has opened a location at Independence Center.

“We’ve been waiting for that ridiculous law to be repealed,” said Wagner, whose company buys and resells tickets at prices that exceed face value. “This is a great, great thing for Missourians.”

But ticket scalping was still illegal last weekend when the University of Missouri and the University of Kansas met in Kansas City to determine the Big XII North champion in football. But you wouldn't have known it had you looked at the vigorous secondary market in tickets around Arrowhead Stadium.

Before the Border War on Saturday night at Arrowhead, there was the Price War in the parking lot.

“Tickets! I got tickets!” a man named Bill yelled as cars crept by him on the way to the MU-KU game. “Two tickets, $600!”

One week before a new Missouri law will kick in legalizing ticket scalping at sporting events, scalpers like Bill, who declined to give his last name, combed their way through the crowd. Tickets with a face value of $30 to $55 sold from $100 to as much as $400.

“This is a day to make money,” he said.

Underpriced tickets create opportunities for scalpers. As I've written before, event tickets are priced with an eye towards expected demand and are oftentimes set months in advance. No one can throw anyone under the bus for underpricing this particular event. Who'd have thought, coming into this game, that MU and KU would have been ranked 4th and 2nd respectively in the BCS ratings with one loss between them and with both schools sporting national championship hopes? Not I, said the fly. The Missouri Tigers, with all their returning talent, had not had many Novembers to remember recently. The Kansas Jayhawks were coming off a 0.500 season in which they were not invited to a bowl.

The beauty of legalized scalping is that it allows tickets to go to the people who value them the most and it allows more information to be used in the setting of ticket prices. But the first article notes that scalping today has some new problems.

Missouri Attorney General Jay Nixon recently cracked down on ticket brokers, suing three of them for scalping tickets to an upcoming Hannah Montana concert at the Sprint Center. Nixon later asked for a temporary restraining order against an Illinois broker who was selling tickets to the recent Missouri-Kansas football game at prices well above face value.

“Unfortunately, the elimination of this consumer-protection tool has come at a time when the ability to take unfair advantage of consumers has grown significantly through the Internet,” said Nixon spokesman Scott Holste.

If he's talking about the ability of scalpers to snap up loads of tickets when they first go online, what amounts to butting into a virtual line, that's not the fault of scalping per-se. You can argue that legalizing scalping increases the benefits from butting-in, but it's not scalping that is the root cause of this problem. It's the butting-in.

If you are cooking a turkey and you realize you might burn your hand, you don't throw away the food to keep from getting burned. You take other precautions to keep from getting burned. Why ban an activity where people engage in voluntary trade when the problem lies elsewhere?

Why not ban computers? Technology has lowered the cost of butting in, so if you make an argument that scalping should be banned because of the butting in, you can make a similar argument about banning computers.

Of course banning computers is not the optimal solution, but neither is banning the secondary resale of tickets above face value.

(Cross-posted at Market Power)

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Wednesday, July 25, 2007

Bringing the Game Back - The Role of Prices 

Responding to some of the doomers and gloomers who see the NBA going to hell in a handbasket, Dave Berri argues that the the association will not suffer any long-term consequences from its current officiating/gambling scandal (King has thoughts here and Tom Kirkendall has some thoughts here).

Dave notes his research with Martin Schmidt about attendance following labor strife in professional sports. This research, published in 2004 in the American Economic Review and discussed in their book with Stacey Brook, Wages of Wins, is relevant because we have an event which some say threatened the long-term health of the sport. Schmidt and Berri show that despite the prediction of doom and gloom, attendance comes back to trend quickly after the strife ends. Why? One possibility is through ticket pricing.

According to average ticket price data obtained from the Team Marketing Report Database*, the average real (BY 2005) ticket price in baseball was 6.8% higher in 1994 than in 1993. In 1995, the average baseball club lowered its real ticket prices by 0.1%. Five clubs raised ticket prices and the other 23 lowered their ticket prices. Colorado began play in Coors Field in 1995 and was only in its third year of existence, meaning there was probably still a honeymoon effect going on with the team and the stadium. When we drop Colorado from the calculations, the average ticket price fell by 1.3%.

In 1996, the average real ticket price went up by 2.1%. Thirteen teams lowered their real prices and the other 15 raised their average real price. In 1997, the average real price went up by 6.4% and only 7** teams lowered their average real ticket price. Certainly there are many things that can affect the prices that teams charge, but it appears that part of the reason fans came back after the strike is that the teams set prices to draw them back. Moreover, to the extent that habit persistence explains the demand for baseball, the long-term health of the game after the strike can be partly explained by the pricing decisions of teams immediately after the strike ended.

The current scandal in the NBA, at least what we know now, is isolated and sends few, if any, signals about the overall integrity of officiating. Even so, we'll be able to see how damaging the NBA thinks the scandal will be on demand by looking at team ticket prices next season.

*For those not familiar with the data, The Team Marketing average ticket price series is a weighted average ticket price calculated using prices per section in each stadium weighted by the number of seats in each section. Canadian prices are given in American dollars. The details of the calculations are given at the Team Marketing website.

**7 teams, not 6 as I originally wrote, lowered ticket prices on average in 1997. I've changed the text and the table.

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