Baseball Pricing Presentation

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Baseball Pricing Presentation

• By Shawn Sullivan

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Pricing

• four key pricing elements of material, energy,
  labor and transportation.
• Economics  The Business of Baseball Thematic
  Unit of Study
• The National Baseball Hall of Fame.
• Material Souvenir game program, hot dogs, ect.
• Labor player's contract, Manager
• Energy Lights on field and production on field
• Transportation Parking, public transportation,
  ect

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Pricing Goals

• "Players have absolutely nothing to do with
  ticket prices," says Donald Fehr, executive
  director of the Major League Baseball Players
  Association. "These are management decisions,
  which management makes based on what each club
  ... determines is the economic condition of the
  country and each market."

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Market Sensitivity to Price

• The law of supply and demand ultimately
  determines the economic ebb and flow of baseball
  and the value placed upon it by contemporary
  culture.
• Economics  The Business of Baseball Thematic
  Unit of Study
• The National Baseball Hall of Fame.

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Inelastic Demand of Market to Changes in Price

• Excess Demand 
• Paul McCartneys (April, 2002) concert in Madison
  Square Garden was sold out within two hours of
  the opening of the box office.  A representative
  of the Garden was asked what the effect of
  doubling the 50 - 150 ticket price would be.
  Her reply It probably would have taken three
  hours to sell out. 
• A 1998 Spice Girls concert at the Garden sold out
  within minutes.   (http//www.eonline.com/News/Ite
  ms/0,1,3245,00.html)

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Cost-Volume-Profit

• Since 1995 attendance, player salaries, and
  revenue have all increased.
• Forbes reported in its April15 issue that 20 of
  the 30 teams were profitable last season
• In all, nine teams had an operating profit in
  2001 DON WALKER of the Journal Sentinel staff

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Pricing of Competitors

• Although baseball has been increasing its prices
  it still remains the cheapest.
• Table from CNNfn's Chris Isodore in the article
  Paying the Price.

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Constraints on Pricing Behavior

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Time Dependence

• The Implicit Price 
• Nominal price  100
• Implicit price   far more than 100 ?
• Transportation
• Time at least 5 hours in total.
• This divergence is characteristic of experience
  goods.  They take time to consume, if nothing
  else. 
• As leisure time increase so does demand.

• Entertainment and Media Markets and
  Economics Professor William Greene

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Final Price

• All and what the consumer is willing to pay when
  taking into account the four key elements in
  baseball pricing. Material, energy, labor and
  transportation determine pricing.