College Ticket Pricing

Charles Clotfelter of Duke University has a book coming out soon, called Big-Time Sports in American Universities. He offers examples of a number of schools that have great teams in one major sport (for example, football), and mediocre teams in another (say, basketball). For their mediocre team, the arena is often half-empty, even though the ticket price is quite reasonable. There is excess supply. For the powerhouse team, the ticket price is also reasonable-but at that price there is a huge excess demand for seats.

How to remove the shortage and equilibrate the market? Simple:?at one school, the price of a pair of season tickets is $1,000; to be eligible to pay this amount, one must make an annual “charitable gift” of $7,000 to the university. Presumably this contribution is sufficient to equilibrate supply and demand. I find this quite disgusting-but I suppose it is more desirable for the university to earn the revenue than to have speculators profit by purchasing the tickets and then re-selling them at the market price, although I would bet that some season ticket-holders do scalp tickets on games that they can’t attend for personal reasons.


Tumbolian

Auctions!

Jordan Brown

The tax deductability of such a "gift" seems pretty questionable.

This indirectly reminds me of something I've noticed about my local church school and my YMCA. Both run fundraisers, to which contributions are charitable deductions. The fundraisers are a pain in the neck; why not just raise tuitions or membership fees a bit? Ignoring the question of people who don't donate to the fundraisers, here's an answer: a donation to the fundraiser is deductible, while tuition and membership fees aren't. From a tax perspective, you'd really prefer that the service was "free" and that you fund it by donation.

In fact, why not give season tickets only to those donors who contribute a certain amount?

Aren't taxes fun?

Justin James

And then you have the University of South Carolina, where you also have the system of paying money for the opportunity of buying tickets... despite the fact that the Gamecocks are a lousy team.

J.Ja

Brett

"I find this quite disgusting"

Why? They could charge $8k for the seats, or $1k plus $7k in donations. At least this way you can get a tax deduction for the donation part.

When the demand is dictated by the total opportunity cost, why would the technical allocation of funds disgust you?

the Gooch

As a Nebraska football fan, I know the demand for tickets to games far outstrips the supply. I try to travel to a road game every year, and usually the price scalpers want for just the Nebraska game at Mediocre State is more than Mediocre State season tickets.

The smart thing to do is buy season tickets at Mediocre State, then sell off the other games at or below market price so that you essentially buy just the Nebraska game for a lower price than paying a scalper for the single game ticket.

The very smart thing to do is buy twice as many season tickets at Mediocre State and then sell off all the non-Nebraska games at market price...and the Nebraska game at the scalper price so that at the end of the day, you can basically attend the Nebraska game for free.

60726x

Perhaps someone at the IRS should take a look at the monetary value of the option to purchase a $1000 season ticket and ensure that this value is properly deducted from the charitable donation to the university.

Similarly, perks offered by other charitable organizations providing useful products and services, such as hospitals, should have a declared monetary value for tax purposes.

Charging for preferential treatment is good marketing. Providing tax deductions for preferential treatment is wrong.

Ian Kemmish

Pay per view TV? That way, you get more money than the size of your stadium would otherwise allow, and everyone who wants to, gets to see the game.

I'm sure there are a couple of bright Internet entrepreneurs somewhere who'd be willing to put together a package for universities to buy for a lot less than, say, Rupert Murdoch would charge.

Donald

I don't understand...this is pretty obvious monopoly pricing...How could you be "disgusted" by it, Hamermesh?

john

You're ignoring the fact that marquee teams have an interest in ensuring that the seats are not just filled, but filled with home-team fans. Excess demand is a good thing when you're not only trying to maximize revenue but also attempting to ration goods to the "right" people.

Similarly, you're assuming that holders of season tickets are solely trying to maximize revenue in the aftermarket. By anchoring the price to a much lower value than the true cost (i.e. face value), resellers are more likely to ask a lower price and ration the tickets to like-minded fans when demand once again outstrips supply.

ajl

The tax deductibility of the "gift" is the big problem. It means that other taxpayers are subsidizing the football (or basketball or whatever) fan's leisure activities.
So, to Brett: the reason that the use of a ticket price + donation is "disgusting" is that the "quid pro quo" (money for football ticket) is not a two-party, but a three-party transaction: the ticket buyer, the university, and the poor sap(s) whose taxes are needed to cover the ticket-buyer's deduction. That *is* disgusting.

Nifty Options Tips

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jimi

I suspect anyone who can afford $8000 for season tickets every year is also paying their fair share in income (and other) taxes.

kip

Figures this comes from soneone at Duke... popular basketball program, awful football program. Oh, and world a famous lacrosse team!

PM in VA

How about a conversation about the insane process of setting tuition at colleges. Colleges have astronomical "asking price" that they know nobody can afford, and by their own statistics virtually nobody pays it. It is simply a ruse for parents to disclose their finances and then the college will decide how much it will cost you. And it will always cost a little bit more than you can afford, no matter who you are. What other good or service in the country is priced in this way? Parents who are fiscally responsible (Like me) are punished by having their kids paying 2-5 times more for tuition than others who have spent their earnings foolishly and are then rewarded by colleges with lower tuition. It's outrageous. Who cares about the cost of the Basketball game once you get there.

James Smith

The IRS instructions for deducting charitable contributions are explicit:

"Gifts from which you benefit. If you made
a gift and received a benefit in return, such
as food, entertainment, or merchandise,
you can generally only deduct the amount
that is more than the value of the benefit."

Most school-sponsoring churches have stopped demanding contributions in lieu of tuition and no longer issue fraudulent "contribution receipts." When will colleges and symphonies stop? When the IRS starts sending tax-due notices to their ticket buyers.

Marc Roston

The logical solution for the schools is to extend their ability to perfectly price discriminate allowed by tuition/financial aid packages.

Require all prospective season ticket-holders be matriculating, non-degree students. Tuition for this program will be, say, $100,000 annually. Request they submit FAFSA documentation. The school then re-prices each and every seat in the stadium optimally!

cmeier

But even within a sport, demand may be high for one game and low for another. There was a "You know you're a Buckeye" poster for sale at Ohio State when I was there that had the lines:

... When you've sold your Northwestern tickets for enough to buy a six pack of beer.

... When you've sold your Michigan tickets for enough to pay next quarter's tuition.

Dan

Professional sport teams often require season ticket holders to purchase PSL's, "Private Seat Licenses." I don't see any reason colleges couldn't do it.