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NFL Ticket Price Floors Subverting the Market Clearing Prices

After the incredible win by the Seattle Seahawks last year, the National Football League is as popular as ever, leading the ticket prices for the recently started 2014 season to rise in price. One method many fans have begun to use to purchase tickets are the resale markets, where fans can acquire tickets from other consumers for less than the original asking price. However, as a recent article written by Steve Pociask for Forbes explains, the official secondary market for the NFL, Ticketmaster, has begun to set price floors on ticket sales. This means that consumers cannot purchase tickets off of those websites for below face value.

For many football teams the demand for tickets is so high that the free market equilibrium price remains higher than the original asking price, because the primary ticket sellers are sold out. But with other teams, such as the Jacksonville Jaguars (who lost their first three games this season), the demand has decreased past the point where the equilibrium price equals the asking price, such that now most consumers will only purchase a ticket for less. In an ideal perfectly competitive market, the price of a ticket would decrease in reaction to this shift such that all of the tickets would still sell. The price floors instituted by the NFL run Ticketmaster are preventing many of these transactions from occurring, leading to a surplus of tickets that may go unused. This hurts the consumers, because many fans will not be able to watch the games because prices are too high, and the fans who wished to sell their tickets may not be able to find a buyer.

In our recent classes for INFO 2040 we have been discussing markets and using bipartite graphs to explore how certain prices will clear the market. This specific example could be described by a bipartite graph, where the buyers are Jacksonville sports fans, and the sellers include the Jaguars as well as other local teams. The string of losses suffered by the Jaguars has caused the demand for tickets to decrease, which is represented by a decrease in value for that good to each buyer. The floor on prices restricts the price of Jaguars tickets from decreasing to the market clearing price, causing many buyers to shift to buying tickets from other sports teams because those tickets have greater payoffs (value-price) to the buyers. This will most likely lead to constricting sets involving other sports teams, where not all fans will be able to purchase the ticket that has the highest payoffs for them.

With the instituted price floors, the NFL and Ticketmaster have changed a market that could have found a perfect matching solution into one with a surplus of tickets that go unused (about 10%) and a dead-weight loss in payoffs for the consumers.

Source:

Forbes: How Ticketmaster And The NFL Have Fixed The Price Of Secondhand Tickets

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