Dynamic Pricing for Tickets Displays the Power of Prices

Big Ten Tickets

Dec 9, 2012    •    263 Views    •    EST. TIME TO READ: 2 minutes

For $75 you can see all 9 Big Ten Conference basketball games…Maybe.

Here’s the story.

If you buy a Golden Ticket online from the Minnesota Golden Gophers, you can attend up to 9 Big Ten games but only if Minnesota wins every time you attend. If the team loses when you are there, your ticket is deactivated. At $8.33 a game, you could be saving huge money.

What is going on?

The 250 Golden Tickets are being sold in order to build interest in the less competitive matches. As the thinking goes, worried that his ticket will deactivate, a fan will attend at least one or two games at which he expects Minnesota to win. In that way, by changing the incentive, owners can fill seats that otherwise might have been empty.

Called dynamic pricing, algorithms that maximize revenue are being used by ticket sellers. On a plane, the business person probably paid more than the vacationer sitting nearby; online, prices could change from one hour to the next; at certain theaters, based on sales, ticket prices could spike unexpectedly for orchestra seats. The Golden Ticket is a new take on dynamic pricing but it still involves charging different prices for different people.

Our bottom line? I continue thinking about how miraculous a price is. Conveying information and creating incentives, unregulated prices enable us, as buyers and as sellers, to make decisions that suit us individually.

More specifically, last year at econlife, we explained it this way:

Dynamic pricing is all about price elasticity of demand. If price changes a lot and the quantity we buy remains almost the same, as with medication, then our demand is inelastic. By contrast, if price swings have a big impact on buying, then our response is elastic. With Broadway shows and airline seats, certain consumers have an elastic response to higher prices; when price ascends they say, “No.” Others, the inelastic group, will buy no matter what.

Sources and Resources: This article from ESPN tells the basic story about the Golden Ticket while here is more about dynamic prices and algorithms from marketplace.org. And then, looking for more about dynamic pricing I came across this article on Chicago theater tickets that was fascinating. And here is more about dynamic pricing from econlife.

Hat Tip: Cheap Talk

Note: The title was minimally edited after it appeared.

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