L11 Gate Pricing Strategies

L11 Gate Pricing Strategies - Gate Pricing Strategies...

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    Gate Pricing Strategies Profit Maximization Inelastic Pricing Price Discrimination
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    Significance of the Gate MLB, NBA, NHL, NCAA: Gate receipts  are the single greatest source of  revenue Gate receipts are the lifeblood of minor  league sports NFL only 1/3 of all revenues US consumers spend $12B per year on  admissions to sporting events
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    Percent of seating capacity sold  by league (1997-2002) NFL: 90%-93% NHL: 88%-99% NBA:86%-90% MLB: 57%-64% Source: Text page 352
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    Importance of ticket prices Gate revenue = total ticket sales * ticket  prices Don’t forget gate revenues are a function of  price  and attendance  From 1991-2001 ticket prices in the four  major leagues increased on average 8.4%  annually Despite lower attendance, gate revenue  doubled in that time period
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    Elasticity and Price Strategies  Estimation of elasticity of demand is  critical to price strategy It is typical for different customer groups to  have different a collective elasticity of  demand. It might make sense to raise prices for box  seats and reduce prices for bleacher  seats. Why?? Think about which group of fans is  most concerned with ticket prices.
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    Monopoly Pricing Regardless of market structure, the  golden rule is profit is maximized  where marginal revenue  (MR)  is  equal to marginal cost  (MC) For stadium seats marginal cost is  essentially zero
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    Monopoly Pricing To maximize revenue tickets should be 
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This note was uploaded on 04/17/2009 for the course KINS 4520 taught by Professor Maxcy during the Spring '09 term at UGA.

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L11 Gate Pricing Strategies - Gate Pricing Strategies...

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