Sensible Pricing at the Ballpark

When I was a kid, tickets for grandstand seats at Comiskey Park (where my team, the White Sox, used to play) cost the same regardless of who the opponent was (only 7 possible in those days), the time of day or day of week. At a recent Minnesota Twins game I learned that MLB has gotten smart, pricing differentially depending on the identity of the opponent and the date/time of the game.

For games in the same one-week period a home plate view grandstand seat in Target Field ranges from $36 to $45, with a higher price for night games, weekend games and, most important, for more attractive opponents (sadly, higher, other things equal, for the Red Sox than the White Sox). Probably aided by web technology, teams can do a better job of equilibrating demand and the (fixed) supply of seats, although the current price range and the partly-empty stadium in the game I saw (against the last-place Kansas City Royals) still doesn’t seem great enough to accomplish this completely.

TAGS: , ,

Leave A Comment

Comments are moderated and generally will be posted if they are on-topic and not abusive.

 

COMMENTS: 28

View All Comments »
  1. John B says:

    This type of pricing is a great idea.

    The reason it hasn’t worked, and there are still empty seats, is because the baseball owners don’t believe in the process. They would rather overcharge some people than undercharge anyone.

    If they advertised the process and let the customers know how the pricing worked, people would learn and they would fill more seats.

    Scalpers do this more intelligently and fairly–meeting supply and demand. Go to a late season game with two teams out of the running and buy scalped tickets for 20/30 cents on the dollar.

    Thumb up 4 Thumb down 0
    • DaveyNC says:

      It is a great idea, but the average Joe would think that the evil owner is ripping him off by charging more for a Red Sox game. I mean, who wants to see the Royals, right?

      Thumb up 0 Thumb down 0
  2. Mike B says:

    One of these days the company that will end up replacing Ticketmaster will discover some way to auctions to reliably sell out baseball games. With people getting more and more connected with smart phone Apps, the amount of complexity that an end user will be able to tolerate will rise. For example imagine a system where a fan places a bid to attend a certain game and then gets to make a seat choice based on how his willingness to pay matches others. So if someone is willing to pay $100 for a ticket they will get to pick their seat before someone paying $99 for a ticket.

    The only problem is that game attendance requires a certain amount of pre-planning so the system would have to include either multiple rounds of bidding (with adjustable price floors) or some sort of fixed price option.

    Now if states or the federal government passes laws barring teams from restricting resale of tickets (or fees associated therein) the secondary market will open up dramatically so all wasted season tickets can get snapped up by people who actually want to go to games.

    Thumb up 4 Thumb down 0
  3. Eric M. Jones. says:

    Daniel,

    You impute that the supply of seats is finite and the ticket prices in some way are correlated. But the truth is that a huge and growing number of seats are empty. Shouldn’t filling the seats for the highest net profit be the real issue?

    Thumb up 4 Thumb down 0
    • Cañada Kid says:

      Filling the seats for highest net profit should be the main concern, yes… unless filling the seats results in lower profit than selling X amount for Y dollars.

      For example, if there were 20,000 seats (random figures, don’t take my word for them) being sold at an average price of $20 each, selling out would provide the ballpark with $400,000. Let’s say the cost to run the game, on average, is $250,000 (again, random figure chosen for ease of calculations). The net profit in that case is $150,000. What if, by raising the prices of tickets such that the average price became $30, only 15,000 tickets were sold? a 50% increase in price lowers attendance by 25%. The gross profit in the second case becomes $450,000, with a net profit of $200,000. Economically speaking, the second case is the desired one, resulting in most profit, yet it doesn’t fill up all the seats.

      The maximum value, or profit in this case, isn’t always with selling the most quantity.

      Well-loved. Like or Dislike: Thumb up 9 Thumb down 1
      • Nick says:

        And what about the 5,000 people that aren’t buying concessions in your above scenario?

        Well-loved. Like or Dislike: Thumb up 7 Thumb down 1
      • Cañada Kid says:

        Seeing as concessions don’t bring in the most money dollar-wise (they certainly have a high price for their cheap cost, however) it should be decently negligible, unless you’re this park: http://www.businessinsider.com/the-most-expensive-hot-dog-ever-2011-7

        The seats that wouldn’t be filled, i.e. the 5,000 people you mentioned, are most likely those who would have sat in the upper deck or top rows of the field level, who were borderline coming to the game or not. The heavy concessions-purchasers (also known as the beer nuts) attend the games regardless of a 20% price increase, speaking from experience watching the Giants’ attendence (it actually ROSE with the price increase… darn World Series). Those viewers purchase numerous ‘drinks’ as well as foods. If the 5,000 who didn’t go to the game came from that crowd, concessions would be a bigger part of the missing profit.

        But because those who are borderline probably wouldn’t spend much money at the game anyways, seeing as a small increase in ticket prices (the price for two sodas), their impact could probably be dismissed by us as negligible.

        Thumb up 3 Thumb down 0
      • VH says:

        I think your comments are right on. I am somewhat familiar with the hotel business. This is very similar to the ballpark in the limited supply (rooms vs. seats), though ballparks don’t have the same competition model. In hotels there is a standing rule: if you have more than 80% occupancy, you aren’t charging enough for a room-night. This 80-20 rule manifests itself in many service industries as well. For many service providers, 80% of their income comes from the top 20% of their customers. For that reason they should treat their top 20% very well, as focusing on the bottom 80% is playing with the margins. I think ballparks have the same rules.

        Thumb up 0 Thumb down 0
    • Tiffany says:

      I got the impression from the final sentence that the author is skeptical that this is the most profitable way to approach ticket pricing as well.

      If you can sell 500 seats at $20, but only 400 at $25, you don’t really reap the benefits of this pricing model. It also fails to take into account that those empty seats are not spending any money while in the ballpark. All other things being equal, I’d rather get more butts in the seats to generate revenue through concessions and merchandise. On the average trip to the ballpark, I spend more on concessions than I do on the tickets.

      Thumb up 1 Thumb down 0
  4. Cory says:

    This is old news. Some teams have been doing this for years.

    And I will disagree with your assertion that there is sensible pricing at the ballpark if and only if a hot dog and a beer costs comes down below the outrageous $15 level that is commonpace today.

    Thumb up 1 Thumb down 1
  5. Stephen says:

    Uhm, the team isn’t trying to equilibrate supply and demand. The team is trying to maximize profits. They have a monopoly position. It’s completely reasonable to expect them to choose to set prices above the market-clearing price.

    What they clearly aren’t doing perfectly is price discriminating.

    Thumb up 1 Thumb down 0
  6. Cañada Kid says:

    I’ve noticed this at San Francisco, too, for a while now. Giants games have ranging prices as well. For example, a field level ticket on a Wednesday day game against the Nationals costs just as much as an upper deck ticket at a Friday night game against the Diamondbacks. It seems to be working here in San Francisco, as every home game this season has been a sellout…

    BUT that could be because we are the best team in baseball, as of November 1st 2010 at 7:54 PM :)

    Thumb up 3 Thumb down 1
    • caleb b says:

      Last year, I think, the SF Giants and several other pro teams began using a consulting firm that helps set ticket prices. The firm was started by a couple of Econ PhDs and they use algorithms such as temperature, starting pitching, time of day, division race, etc to create a dynamic pricing structure.

      Business Week wrote an article about it around a year ago. Here is the link:
      http://www.businessweek.com/magazine/content/10_22/b4180039348750.htm

      Freakonomics: Please get an interview or do a podcast on Barry Kahn, the founder of Qcue.

      Thumb up 4 Thumb down 0
      • Cañada Kid says:

        I second that: please get an interview or podcast with Barry Kahn!

        Interesting article there. It seems to be only a matter of time before Qcue extends to other sports. I wonder how it would fare, pricing a golf tournament…

        Thumb up 1 Thumb down 0
  7. Bree says:

    Part of the reason games vs the White Sox are cheaper than games vs the Red Sox is that the Twins play the White Sox more often.

    Thumb up 3 Thumb down 0
    • Ulysses says:

      I don’t think that has much to do with it despite that intuitively it makes some sense. The White Sox are the Twins’ biggest rivals, which I know because I’m a White Sox fan like prof. Hamermesh, and they are ours.

      The White Sox tend to charge more for Boston and New York when they host those teams compared to hosting the Twins, mainly because those are generally the premier teams in the league on a year-to-year basis, and there is simply more demand: Boston and New York fans are more abundant and they travel with the team more. If the Sox are lousy, more locals will sell their tickets for cheap and you’ll see an even higher percentage of visiting fans.

      Likewise, I’d guess that Twins tickets are a bit higher when the White Sox are in town compared with the Kansas City Royals–another divisional foe, but a perennial doormat with whom there isn’t much of a rivalry.

      The Sox have run into problems with dynamic pricing because it isn’t always used well. A famous example here was hosting the LA Dodgers a year or two ago, which was labeled a “premier” game with the highest pricing possible. This was a mistake because it was a weekday game against a complete and utter non-rival, and furthermore the Sox were mired in mediocrity at the time and not exactly a hot ticket in any sense. The org simply priced the local fans out of that series and the attendance was abysmal. The org then had the audacity to passively-aggressively complain about it.

      Thumb up 1 Thumb down 0
  8. B says:

    Keep in mind teams are not trying to fill every seat, but rather their objective is to maximize revenues for the season. In a hypothetical world, of course the way to do this is to fill every additional seat at the maximum price some person out there is willing to pay until they’re all full. In the real world, that isn’t possible. You have to keep in mind any attempt to mark prices down to capture a lower part of the demand curve carries with it the possibility that people higher up the demand curve will also attempt to take advantage of this lower price. It very well might be that the long term revenue maximizing point involves a lot of empty seats, because it gets the people willing to pay a lot of money for those seats to continue to pay it, since they do not have a more attractive option.

    Thumb up 1 Thumb down 0