Multiproduct Pricing in Major League Baseball: A Principal Components Analysis

Economic Inquiry, Forthcoming

38 Pages Posted: 21 Sep 2004 Last revised: 22 Sep 2009

See all articles by Craig A. Depken

Craig A. Depken

University of North Carolina at Charlotte - The Belk College of Business Administration - Department of Economics

Darren P. Grant

Sam Houston State University - College of Business Administration - Department of Economics and International Business

Date Written: July 1, 2006

Abstract

The theory of multiproduct pricing is well developed in stylized models, although a unified theory has yet to be developed. As such, empirical analyses are rarely guided by strong theoretical hypotheses and are therefore scarce. This paper analyzes the interactions of ticket, parking, and concession prices in Major League Baseball for the period 1991-2003 using a principal components methodology. The approach allows inferences to be formed about the factors underlying intertemporal price variation in the absence of information about costs and demand. The most important factor influencing prices in baseball is a general increase in the demand for baseball, but general demand shifts explain less than half of all price variation. The second most important factor is pricing interactions between tickets and concessions that are consistent with theories of nonlinear multiproduct pricing. Secondary empirical analysis confirms these economic interpretations. The results show that the principal components methodology is an effective way to draw inferences about the economic forces underpinning pricing in a multiproduct context using data on prices alone.

Keywords: Multiproduct pricing, sports, structural model, complements, substitutes, principal components

JEL Classification: D40, L11, L13

Suggested Citation

Depken, Craig A. and Grant, Darren P., Multiproduct Pricing in Major League Baseball: A Principal Components Analysis (July 1, 2006). Economic Inquiry, Forthcoming. Available at SSRN: https://ssrn.com/abstract=913625

Craig A. Depken

University of North Carolina at Charlotte - The Belk College of Business Administration - Department of Economics ( email )

Charlotte, NC 28223
United States

Darren P. Grant (Contact Author)

Sam Houston State University - College of Business Administration - Department of Economics and International Business ( email )

SHSU Box 2118
Huntsville, TX 77341-2118
United States
936-294-4324 (Phone)

HOME PAGE: http://www.shsu.edu/dpg006

Register to save articles to
your library

Register

Paper statistics

Downloads
159
Abstract Views
1,188
rank
190,564
PlumX Metrics