From the Denver Post:
In the movie, “Max,” John Cusack, in the title role, was asked why the paintings in his art gallery were so expensive.
“So people will buy them,” Max said.
So, demand curves for art slope upward? No. Cusack’s character suggests that prices contain information regarding the quality of the artwork.
A few years ago, the Rockies started a “premium,” or more expensive, pricing program for select single-game tickets. There are always bigger crowds at the more expensive games than those played at regular price.
College football teams do this too. To watch the Nebraska Cornhuskers play the Missouri Tigers in Columbia, you’ll have to pay a higher ticket price than if you watch Missouri play, say, Western Illinois in Columbia. The NU game will also come close to selling out. The other game won’t. Once again, this must be evidence that demand curves slope upward. No. It means the demand for these “premium” games is larger.
For a fifth consecutive season, the Rockies, to their credit, have acknowledged their disappointing on-field performance by not raising their season-ticket prices. No wonder attendance is down from the early years. In baseball, like art, people won’t pay to look at a cheap product.
Is the columnist for real here, or is he just playing with us? Setting ticket prices to sporting events is a classic case of price-setting under uncertain demand. The Rockies don’t know what the demand for their games will be, but they have a good idea of what fans want. Fans make their purchase decisions based upon the expected quality of the product (among other things). They base their decision to buy tickets, especially season tickets, with an eye towards last season and with an eye towards the team’s off-season moves (see here). This year’s Rockies roster will contain players from last year and players acquired in the offseason. To estimate the quality of the current team, fans will make a decision on how they believe players from last year’s team still on the roster will perform this year. If last year’s team didn’t perform well, all else equal, it is less likely that those held over from last year will perform well this year. That leads to a decrease in demand for this year’s tickets. Teams respond by lowering (or not raising) their ticket prices. The opposite case happens when a team performs well, especially unexpectedly well.
