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Designing and Evaluating Dynamic Pricing Policies for Major League Baseball Tickets

33 Pages Posted: 18 Jun 2016 Last revised: 24 Oct 2017

Joseph Xu

Tepper School of Business, Carnegie Mellon University

Peter Fader

University of Pennsylvania - Marketing Department

Senthil K. Veeraraghavan

University of Pennsylvania - The Wharton School - Operations, Information and Decisions

Date Written: October 22, 2017

Abstract

Many firms have difficulty evaluating the impact of their pricing policy, which further inhibits their ability to properly design and implement dynamic pricing. We address this issue in the context of single-game ticket pricing for a Major League Baseball franchise. We develop and estimate a comprehensive demand model to help evaluate and design dynamic pricing policies for the franchise. Our model encompasses all relevant aspects of the demand generation process, including ticket quantity and stadium seat section choice. The demand model reveals factors that drive sport ticket revenue such as the effect of home team performance on the overall price sensitivity and the relationship between customers' arrival timing and product choice. We show that by leveraging these insights and allowing sufficient pricing flexibility, the franchise can achieve a potential revenue improvement of 17.2% through daily price re-optimization, which is comparable to that of a clairvoyant policy in which the future evolution of demand is assumed to be known.

Keywords: Empirical OM, Pricing and Revenue Management, OM Practice

Suggested Citation

Xu, Joseph and Fader, Peter and Veeraraghavan, Senthil K., Designing and Evaluating Dynamic Pricing Policies for Major League Baseball Tickets (October 22, 2017). Available at SSRN: https://ssrn.com/abstract=2796407 or http://dx.doi.org/10.2139/ssrn.2796407

Joseph Xu (Contact Author)

Tepper School of Business, Carnegie Mellon University ( email )

Pittsburgh, PA 15213-3890
United States

Peter Fader

University of Pennsylvania - Marketing Department ( email )

700 Jon M. Huntsman Hall
3730 Walnut Street
Philadelphia, PA 19104-6340
United States

Senthil K. Veeraraghavan

University of Pennsylvania - The Wharton School - Operations, Information and Decisions ( email )

Philadelphia, PA 19104
United States

HOME PAGE: http://https://oid.wharton.upenn.edu/profile/senthilv/

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