Scoring a Touchdown with Variable Pricing: Evidence from a Quasi-Experiment in the NFL Ticket Markets

Hayri A. Arslan (), Necati Tereyağoğlu () and Övünç Yılmaz ()
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Hayri A. Arslan: Alvarez College of Business, University of Texas at San Antonio, San Antonio, Texas 78249
Necati Tereyağoğlu: Darla Moore School of Business, University of South Carolina, Columbia, South Carolina 29208
Övünç Yılmaz: Leeds School of Business, University of Colorado, Boulder, Colorado 80309

Management Science, 2023, vol. 69, issue 8, 4435-4456

Abstract: Although variable pricing enables sports teams to respond to changing demand across games, reports point to somewhat limited implementation. In this paper, we study the implications of a switch to variable pricing on the primary and resale ticket markets using quasi-experimental data from the National Football League. Applying a difference-in-differences technique with propensity score weighting, we first show that the adoption of variable pricing increases primary market ticket sales by 1.59% per game. We then explore the mechanism behind this positive impact. We find that lower prices for the less attractive games are well received by customers, and customers do not have an unfavorable response to higher prices for the more attractive games. Our analysis of the customers’ activities in the resale market shows that the minimum resale market prices increase for the more attractive games following the switch to variable pricing. This analysis provides evidence for the increase in the option value created by the resale market and explains the positive response to higher prices for the more attractive games. Finally, we investigate when variable pricing is likely to be the most effective. We find that variable pricing has greater success in team hometowns with lower income levels and higher income diversity, and creating more game tiers in variable pricing leads to higher sales.

Keywords: ticket pricing; resale markets; sports events; difference-in-differences; propensity score (search for similar items in EconPapers)
Date: 2023
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Persistent link: https://EconPapers.repec.org/RePEc:inm:ormnsc:v:69:y:2023:i:8:p:4435-4456

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