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Equilibrium Price Dynamics in Perishable Goods Markets: The Case of Secondary Markets for Major League Baseball Tickets

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  • Andrew Sweeting
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    Abstract

    This paper analyzes the dynamics of prices in two online secondary markets for Major League Baseball tickets. Controlling for ticket quality, prices tend to decline significantly as a game approaches. The paper describes and tests alternative theoretical explanations for why this happens in equilibrium, considering the problems of both buyers and sellers. It shows that sellers cut prices (either fixed prices or reserve prices in auctions) because of declining opportunity costs of holding onto tickets as their future selling opportunities disappear. Even though prices can be expected to fall, the majority of observed early purchases can be rationalized by plausible ticket valuations and return to market costs given product differentiation and uncertainties about ticket availability.

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    Bibliographic Info

    Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 14505.

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    Date of creation: Nov 2008
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    Handle: RePEc:nbr:nberwo:14505

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    Cited by:
    1. Graddy, Kathryn & Hall, George, 2009. "A Dynamic Model of Price Discrimination and Inventory Management at the Fulton Fish Market," CEPR Discussion Papers 7315, C.E.P.R. Discussion Papers.
    2. Daniel, Rascher & Andrew, Schwarz, 2010. "Illustrations of Price Discrimination in Baseball," MPRA Paper 25807, University Library of Munich, Germany.
    3. Phillip Leslie & Alan Sorensen, 2009. "The Welfare Effects of Ticket Resale," NBER Working Papers 15476, National Bureau of Economic Research, Inc.

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