Ticket Prices for the World Series

The professional baseball league in the United States is currently in the championship round.  This round is known as the World Series.  To win the championship, a team needs to win four games before the other team wins four games.  This year, the St. Louis Cardinals and the Boston Red Sox are competing for the championship, and after four games, the series was tied 2-2.  Game 5 was played in St. Louis, where the Red Sox held on to an early lead and won the game.  Game 6 will be played in Boston, and the Red Sox now have a 3-2 advantage in the series, needing only one more game to clinch the championship.  I found an interesting article that discusses the rapid fluctuation in ticket prices for this upcoming game.  This article is entitled “Record prices for Game 6 tickets.”

According to the article, the price of the lowest class of seats increased by $275 from the beginning to the end of Game 5, due to the likelihood that Boston would win this game and then have the opportunity to finish the series in Game 6.  The most expensive seats that were sold in this frenzy were upwards of $24,000 per seat.  The opportunity to see a team win a championship has drastically changed the demand curve for ticket prices, which, according to the article, are now on par with the 2013 Super Bowl.  In this situation, the demand for baseball tickets is in the inelastic range, as a sharp increase in ticket prices has not decreased quantity demanded at nearly the same rate.  In a situation like this, is the price too high, or is a fan’s love of the game and/or team enough to overcome the much higher ticket prices?

Perhaps an important factor to consider is the supply side of this upcoming game.  The baseball stadium has fewer than 40,000 seats available (To compare, an average NFL stadium can hold roughly 70,000, according to a chart on the website “Stadiums of Pro Football”).  This restricted supply, has contributed to make the demand inelastic and cause record prices for a World Series game.  Another factor that would help is the secondary ticket sales market, which include individual scalpers and institutionally-aided sales though sites such as StubHub.  These secondary sales help to price-discriminate and consequently capture more consumer surplus.

Again, the upcoming game is Game 6.  If St. Louis were to win and force a Game 7 (which would also be in Boston), the ticket prices could be impacted even more.


Dave Tufte said...

This is interesting. I'm not surprised by this story, but I did miss it at the time.

I think the demand for tickets was always inelastic. What's happened now is that it has shifted to the right. Supply has not shifted though, so the quantity demanded is about the same, just at a much higher price.

Dave Tufte said...

Oops. Bob got a 94/100 for poor verb/object agreement.

BTW: the smaller stadium size in baseball does not do anything to make demand inelastic. What it will do is cause equilibrium to be further to the left along the inelastic demand.

Chad said...

The demand for World Series tickets was and always has been inelastic. The only thing that changes with the rising prices for game 6 are the type of people that buy the tickets. At a regular season game you get a wide variety of fans that show up to the ballpark. Due to the lower prices for nose blead seats you see many lower income consumers that still find consumer surplus in buying the tickets because of the experience of being at the park. When you raise the price of those crap seats by two hundred dollars it weeds out those types of fans because there is no longer any surplus to be had. On the contrary you have people that weren't willing to buy the nose bleed seats because they were crap and they felt that the experience would suck. For those fans there would be no consumer surplus. When the possibility of a team being able to win a World Series arises you provide that consumer surplus no matter where the seats are. So there is always an inelastic demand for the tickets, who is demanding them just changes.

Dave Tufte said...

Chad: 50/50

I think the overall tone of this is OK, but the economics is creaky in a couple of spots.

Perhaps demand is inelastic. But, the way we typically figure this out is compromised by the fact that seat supply is always inelastic. It's hard to tell what's going on with demand if we can't watch supply shifting back and forth.

I do think that a World Series game shifts demand to the right. But, this is a market demand, that is composed of a bunch of individual demands. I think Chad's point is that for some fans, their individual demand can't shift out by much, since they are income constrained. For other fans, where income is less of an issue, we observe the full shift out reflecting their increased interest in the game and their ability to still pay for the tickets. So, yes, there could be a change in the composition of people you see in the stands.

As to consumer surplus, it isn't correct to say that the consumer surplus is provided. Consumer surplus is all in our heads (in the best possible way). We bring the desire to see the game, and we act on that with our purchases. If we don't have that desire, we won't get any consumer surplus anyway.

So, for a World Series game, what happens is that everyone's interest is up. But interest isn't the same as surplus. To get that surplus we've got to be willing to establish the value of our interest with the opportunity costs we're willing to forgo. So, a richer but disinterested fan may get a lot of consumer surplus from going to the big game because they're willing to give up, say, an extra day of vacation in some sunny spot. A poor, but serious fan, might have a whole lot more interest in the game, but chooses not to make the tradeoffs to take advantage of that; deciding instead to get a lot of consumer surplus by having food in the fridge rather than a ticket in hand.