Monday, September 10, 2007

Economics of Ticket Prices

Ticket prices is an emotive issue, particularly in the past 10 years, which have seen ticket prices increase faster than the rate of inflation. A top price ticket at Manchester United will cost £38. At Chelsea £48.

Listen to any football supporter and it will not be too long before talk of the "real supporter" being priced out of the game by a "new breed of supporter" - This new supporter is characterised as preferring champagne and salmon, rather than standing on the terraces, eating meat pies, and shouting obscenities at the opposition.

Football clubs have a conflict between charging the maximum price they can and keeping prices low for their "real supporters". As a consequence we see many top clubs regularly sold out with long waiting lists to get tickets.

From an economic point of view, this is not rational. If demand is greater than supply and there is a shortage, the firm(football club) should put up prices to increase revenue. Furthermore to maximise profit, it may not be necessary to fill the stadium. If demand is inelastic profit may be maximised at a price which leads to empty seats.

Profit is maximised where MR=MC. The MC of an extra supporter coming to the game is quite low. Therefore ticket prices should be set at a price to where revenue is maximised and this is not necessarily where the stadium is full.

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