Optimal dynamic pricing for sports games with habitual attendance

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.

Are Fair Weather Fans Affected by Weather? Rainfall, Habit Formation, and Live Game Attendance

“…Consumers maximize utility subject to a budget constraint with prices p c for game tickets and p y for the nonaddictive good, and monopoly teams set ticket prices to maximize profits. Won and Lee (2008) extend this model to an infinite horizon setting. These models show that habit may be an important component of fan attendance decisions and generate specific predictions about team-pricing decisions in the presence of habituated fans.…”

“…Ahn and Lee (2007) develop a two-period model of life cycle attendance at sporting events that includes habitual attendance and investigate the impact of habit formation on price setting. Won and Lee (2008) extend this model to an infinite horizon model. These models show that habit formation may be an important component of attendance decisions, and generate specific predictions about team pricing decisions in the presence of habituated fans.…”

Sports Fans, Identity, and Socialization: Exploring the Fandemonium

“…Although flow theory typically relates only to adjacent programming on the same network, in the case of NFL programming it is worthwhile to investigate whether a cross-channel effect exists as the foundational tenets of flow theory, namely audience availability and viewer program preference, are applicable regardless of channel. Given the habitual nature of sports viewership well-documented in the sport management literature (e.g., Borland & Lye, 1992;Owen & Weatherspoon, 2004;Spenner, Fenn, & Crooker, 2010;Winfree & Fort, 2008;Won & Lee, 2008) coupled with the fact that Sunday afternoon games always appear on one of two networks, we assume fans have some awareness of the channels on which games may appear.…”