Tuesday, September 15, 2009


The Dallas Stars are implementing a dynamic pricing system for their hockey games. Economic theory predicts this will increase profits, and total welfare, but that consumers may be worse off overall. But then there are also the psychological factors to consider. Will consumers react negatively, or will this approach become more common?

1 comment:

  1. Aside from the tendency for dynamic pricing models alienating companies from its clients, there lies a deeper problem when applied to the traditional business model used in sports.

    I think that the pricing strategy may backfire when the player's associations and agents are able to leverage high ticket prices into better contracts. For example, if Alexander Ovechkin can prove that his appearance will boost ticket prices, his agent will be able to negotiate for a better contract using objective game- and season-specific data. When multiplied by all of the players in the league, contract negotiations will no longer be actual negotiations; just the agent proving the player's worth with statistical data supplied by the team. The only teams to survive the contract renegotiation onslaught would be those with the lowest ticket demand and those teams will be more worried about staying afloat. There won't be any profits to redistribute

    Higher contracts will mean higher costs which will be passed on to the consumer in higher ticket prices. Thus the dynamic pricing model fails since simply raising the price of tickets is not very dynamic.