Optimal dynamic pricing for sports games with habitual attendance

Dong C. Won and Young Hoon Lee ()
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Dong C. Won: Ajou University, Suwon, South Korea, Postal: Ajou University, Suwon, South Korea

Managerial and Decision Economics, 2008, vol. 29, issue 8, pages 639-655

Abstract: This paper provides a theoretical analysis of the optimal pricing decisions of a sports team that maximizes lifetime profits in sports markets where game attendance is habit-forming for sports fans. The long-run equilibrium price and attendance level are found to be greater than the counterparts of the static framework, respectively. The infinite horizon model shows that the pricing strategy of the firm brings about an upward-crossing of two different dynamic price paths where the price path with stronger habit formation initially stays below, catches up, and ultimately rises above the price path with weaker habit formation. It is worth noting that the upward-crossing phenomenon is not fully understood in a finite-period model. Copyright © 2008 John Wiley & Sons, Ltd.

Date: 2008
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