Lies’ diesen Beitrag auf deutsch!

For many games, demand for tickets is so large that some system of rationing or allocation has to be found. Obvious examples are World Cups (I still remember the enormous effort it took to order tickets for the 2006 WC, including server overload, several “application rounds” etc. At least I got to see Ghana vs. Czech Republic live) or finals in the European Cup. There are even whole clubs – BVB and Bayern – where home games are more or less always sold out.

This is extremely irritating for an economist: If demand is exceeding supply so obviously, why aren’t prices simply increased? (Adding supply in the short run is difficult, as building a bigger stadium takes time.) This would mean higher profits for the club / organizer after all!

As we usually don’t suspect soccer clubs to be charities, there has to be a better explanation. Fortunately, Gary Becker, the recently deceased Economics nobel prize winner, has already thought about this question. (I know, the Economics Nobel is not a proper nobel, I don’t care) His original paper can be found here, published 1991 in the Journal of Political Economy. The peg for the paper are restaurant prices, but as Prof. Becker mentions in the paper, the argument works as well for sport events.

I’ll heroically presume to summarize his model shortly (and hope that the economics god does not strike me down for this): The central idea is the following: Consumers (stadion visitors) like the stadion visit more if other people also want to watch the game. This leads to 2 (locally profit maximizing) equilibria: One with a low price and over capacity (stadium half empty, think FSV Frankfurt and 1860 Munich) and one with high prices and excess demand (crowded stadiums, think BVB and Bayern).

If a club in the “good” equilibrium increases prices, they run the risk of slipping into the “bad” equilibrium (and moving the other way is a lot harder).

Why is that? Even if a price increase only leads to a slight decrease in demand, this decrease means less utility for all other potential visitors (which would still buy a ticket in spite of the price increase). This leads to slightly less demand among this group, which again lowers utility for the rest etc. Suddenly, the stadium is half empty and you are MSV Duisburg.

Besides this – very convincing! – explanation, there are some (complementary) arguments why ticket prices are not higher:

  1. Price fairness: Also mentioned by Prof. Becker; prices perceived as unfair might decrease (future) demand. Especially relevant for one-time events (see top-game premium…).
  2. Distinct consumer groups: Assuming that only certain spectators are the ones responsible for the atmosphere and that these have a lower willingness-to-pay (because they are probably poor students or something), cheap tickets for those consumers make sense. To prevent rich customers (who do not provide atmosphere) from taking advantage, discounts are bound to students / standing area / fanclub member etc.
  3. Other revenue: Ticket prices are not the only thing stadium visitors pay for. Food and drinks, merchandising, the club magazine etc. A cheap ticket then serves as a “loss leader” to get people in the stadium.

Bundesliga clubs, by the way, seem to have understood these arguments very well. The attendance figures are consistently very high, no club is trapped in the “bad” equilibrium. (In contrast to the Italian clubs…)

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