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Fairness constraints on profit-seeking: evidence from the German club concert industry

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  • Hendrik Sonnabend

    (University of Hagen)

Abstract

Unlike Kahneman et al. (Am Econ Rev 76(4):728–741, 1986) iconic snow shovel, live music is a performance good that fans attach a particular value to. Hence, an artist’s pricing decision might differ from standard rent-seeking behavior. In this paper, I propose a model that incorporates fairness concerns into the pricing decision for concert tickets. The hypotheses derived from this model are tested on data from the German club concert industry. The results are consistent with the model: Although (1) price dispersion is the dominant pricing strategy in the club concert industry and artists prefer to perform on a Friday or Saturday night, (2) artists do not set higher prices on the weekend. These results are consistent with fairness constraints, but are difficult to explain within a standard profit maximization framework. As a third result, (3) the data reveal that ticket prices are positively correlated with a city’s number of inhabitants .

Suggested Citation

  • Hendrik Sonnabend, 2016. "Fairness constraints on profit-seeking: evidence from the German club concert industry," Journal of Cultural Economics, Springer;The Association for Cultural Economics International, vol. 40(4), pages 529-545, November.
    • Handle: RePEc:kap:jculte:v:40:y:2016:i:4:d:10.1007_s10824-016-9282-9
    DOI: 10.1007/s10824-016-9282-9
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    References listed on IDEAS

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    Cited by:

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    2. Anna Kukla-Gryz & Joanna Tyrowicz & Michał Krawczyk, 2021. "Digital piracy and the perception of price fairness: evidence from a field experiment," Journal of Cultural Economics, Springer;The Association for Cultural Economics International, vol. 45(1), pages 105-131, March.
    3. Bronwyn Coate & Robert Hoffmann, 2022. "The behavioural economics of culture," Journal of Cultural Economics, Springer;The Association for Cultural Economics International, vol. 46(1), pages 3-26, March.
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    More about this item

    Keywords

    Fairness; Behavioral pricing; Live music performance; Kinked demand;
    All these keywords.

    JEL classification:

    • D42 - Microeconomics - - Market Structure, Pricing, and Design - - - Monopoly
    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • L12 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Monopoly; Monopolization Strategies
    • Z11 - Other Special Topics - - Cultural Economics - - - Economics of the Arts and Literature

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