Price Discrimination in the Concert Industry

Abstract

Concert tickets can either be sold at a single price or at different prices to reflect the various levels of seating categories available. Here we consider how two product characteristics (the artist's age and venue capacity) influence the likelihood that pop music concert tickets will be sold at different prices. We argue that valuation heterogeneity, and thus the returns to using price discrimination, are higher for older artists and in larger venues. We test this hypothesis in a large dataset of concerts. By singling out variations in the two characteristics that are exogenous to the decision to price discriminate, we show that these characteristics have a large and significant impact on the use of price discrimination.

Keywords: Price discrimination, profit maximization, second degree price discrimination

JEL Classification: D42, L82, Z11