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The art of ticket pricing

Daniel Snyder and the Redskins are in the news again, this time for introducing a new pricing strategy under the guise of "The Touchdown Club."

Washington Redskins fans who wish to vault over the 75,000 names on the waiting list for season tickets to obtain prime seats at FedEx Field for the 2005 season can pay $7,500 to join the team's new Touchdown Club, the Redskins announced yesterday.

... The Touchdown Club follows the lower-priced TailGate Club, which the Redskins started last season.

...The TailGate Club includes a one-time initiation fee of $1,295, plus a $490 season pass for all 10 Redskins home games. In addition to lower-level seats, which are scattered throughout the lower bowl, TailGate Club members have access to a cordoned-off pavilion area just outside the stadium, where food is provided and fans can listen to music and watch wide-screen television.

Although the food and music have value, these are mere sweeteners which obfuscate the primary intent of the scheme: to extract value from fans on the waiting list who have the money, and can't wait to get their season tickets to the Redskins.

Both the Touchdown Club and the Tailgate Club are what economists call two-part tariffs, a classic pricing scheme which increases a firm's profit over and above what they can make with simple single ticket price. Combined with the wait-list problem, the fixed charge in the two-part tariff can also be viewed as a price discrimination tool, which ensures that those on the waiting list with the highest valuation of Redskins tickets get the goods - and that the Redskins extract that value for themselves.