Why Are Inferior Seats “Underpriced”? Evidence from the English Premier League
Leung Tin Cheuk (),
Kwok Ping Tsang () and
Tsui Kevin K. ()
Additional contact information
Leung Tin Cheuk: Wake Forest University, Winston-Salem, NC, USA
Tsui Kevin K.: Clemson University, Clemson, SC, USA
Man and the Economy, 2020, vol. 7, issue 1, 26
This paper studies the practice of loss-leader pricing strategy in the English Premier League (EPL). While the TV broadcasting revenue for EPL clubs has increased over the past 20 years, the importance of revenue from ticket sales has declined. The theory of multi-product pricing suggests that a change in the relative importance of revenue sources can induce profit-maximizing firms to underprice one product in order to raise the demand for a complementary one. Using other leagues in England and Scotland that do not have as much TV broadcasting revenue as a control group, we find that inferior seats are underpriced among the EPL clubs. Consistent with the growing importance of TV broadcast revenue, we also find that such “loss-leader pricing” is stronger in later years of the sample. Furthermore, we provide evidence that the underpricing of inferior seats is more pronounced in (i) EPL clubs compared to clubs in other European leagues; (ii) elite clubs in EPL compared to non-elite clubs in EPL that have less TV broadcasting revenue; and (iii) clubs promoted to EPL as compared to clubs that are either promoted or relegated to different leagues in England and Scotland. These findings corroborate with the hypothesis that clubs that rely more on TV broadcasting underprice their inferior seats as loss leader to attract more passionate fans.
Keywords: loss-leader pricing; English Premier League; cross-subsidization; D22; L11; L83 (search for similar items in EconPapers)
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed
Downloads: (external link)
For access to full text, subscription to the journal or payment for the individual article is required.
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:bpj:maneco:v:7:y:2020:i:1:p:26:n:5
Ordering information: This journal article can be ordered from
Access Statistics for this article
Man and the Economy is currently edited by Ning Wang
More articles in Man and the Economy from De Gruyter
Bibliographic data for series maintained by Peter Golla ().