Working Paper: NBER ID: w14505
Authors: Andrew Sweeting
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.
Keywords: dynamic pricing; perishable goods; MLB tickets; secondary markets; price dynamics
JEL Codes: L11; L81
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| game date approaching (C73) | prices for MLB tickets (Z21) |
| declining opportunity costs (D61) | sellers cut prices (D40) |
| perishability of the tickets (D44) | observed price dynamics (C69) |