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Pricing Under Uncertain Demand

The pricing of gate tickets to a team's games is a case of pricing under uncertain demand. Ticket prices depend on the demand for a team's games and the demand depends, in large part, on the quality of the team. But when the ticket prices posted on the season schedules are set, nobody knows how well the team will perform. So ticket prices are set with an eye to the future.

One of the factors that fans use to gauge the quality of next year's team is the quality of last year's team. If last year's team performed well, fans generally expect the team to perform well in the current year (as long as "enough" of last year's talent remains on the team) and the demand for the team's games - especially early in the season and for season ticket sales - will be higher than otherwise.

The Los Angeles Clippers have already announced that they are raising the prices of most of the tickets to their games. They didn't make the playoffs and they didn't have a winning season, but they were 13 games above 0.500 at home and they finished the season 3 games above the Lakers in the Pacific Division!

The Clippers, confident they're poised to make a serious run for the playoffs next season, have raised ticket prices in eight of 10 seating areas in Staples Center, an increase of as much as 20% in the prime locations. ...

A spokesman for the Clippers, whose 27-14 home record last season was their best in 12 years, said the team has received few complaints about the price increases. The club has taken 400 new orders for season tickets since the 2004-05 season ended last month, spokesman Joe Safety said.

The Clippers were 37-45 and 10th in the Western Conference, eight games out of the final playoff spot and ahead of the Lakers for the first time in 12 years and only the third time in the Clippers' 21 seasons in Los Angeles.

Teams have latitude in the actual price for which they sell their tickets, so if the Clippers end up underperforming and the demand for Clippers games is less than expected, some tickets will be sold at less than the stated ticket price (see the comments to this post by co-blogger John Palmer, specifically this one by Rod Fort).

Here are the prices for next year's tickets to Clippers games. Note at the time of this writing, individual game prices to Clippers games have not been finalized.