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Optimal dynamic pricing for sports games with habitual attendance

  • Dong C. Won

    (Ajou University, Suwon, South Korea)

  • Young H. Lee

    (Sogang University, Seoul, South Korea)

This paper provides a theoretical analysis of the optimal pricing decisions of a sports team that maximizes lifetime profits in sports markets where game attendance is habit-forming for sports fans. The long-run equilibrium price and attendance level are found to be greater than the counterparts of the static framework, respectively. The infinite horizon model shows that the pricing strategy of the firm brings about an upward-crossing of two different dynamic price paths where the price path with stronger habit formation initially stays below, catches up, and ultimately rises above the price path with weaker habit formation. It is worth noting that the upward-crossing phenomenon is not fully understood in a finite-period model. Copyright © 2008 John Wiley & Sons, Ltd.

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File URL: http://hdl.handle.net/10.1002/mde.1427
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Article provided by John Wiley & Sons, Ltd. in its journal Managerial and Decision Economics.

Volume (Year): 29 (2008)
Issue (Month): 8 ()
Pages: 639-655

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Handle: RePEc:wly:mgtdec:v:29:y:2008:i:8:p:639-655
Contact details of provider: Web page: http://www3.interscience.wiley.com/cgi-bin/jhome/7976

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  1. Becker, Gary S & Grossman, Michael & Murphy, Kevin M, 1991. "Rational Addiction and the Effect of Price on Consumption," American Economic Review, American Economic Association, vol. 81(2), pages 237-41, May.
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  3. Trenton Smith & Young H. Lee, 2006. "Why are Americans Addicted to Baseball? An Empirical Analysis of Fandom in Korea and the U.S," Working Papers 2006-05, School of Economic Sciences, Washington State University.
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  8. Marc Poitras, 2006. "Do New Major League Ballparks Pay for Themselves?," The Journal of Business, University of Chicago Press, vol. 79(5), pages 2275-2300, September.
  9. Craig A. Depken II, 2000. "Fan Loyalty and Stadium Funding in Professional Baseball," Journal of Sports Economics, , vol. 1(2), pages 124-138, May.
  10. Seung C. Ahn & Young H. Lee, 2007. "Life-Cycle Demand for Major League Baseball," International Journal of Sport Finance, Fitness Information Technology, vol. 2(2), pages 79-93, May.
  11. Daniel R. Marburger, 1997. "Optimal ticket pricing for performance goods," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 18(5), pages 375-381.
  12. Karen E. Dynan, 2000. "Habit Formation in Consumer Preferences: Evidence from Panel Data," American Economic Review, American Economic Association, vol. 90(3), pages 391-406, June.
  13. Craig A. Depken, II, 2001. "Fan Loyalty in Professional Sports: An Extension to the National Football League," Journal of Sports Economics, , vol. 2(3), pages 275-284, August.
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