We, Jeff and Sandeep, are working with Northwestern Sports to launch what we think is going to be a revolutionary way to sell tickets to sporting events (and someday theatre, concerts, and restaurants…). Starting today it is in effect for two upcoming Mens’ Basketball games: The February 28 game against Ohio State and the March 7 game against Penn State.
We are using a system which could roughly be described as a uniform price multi-unit Dutch Auction. In simpler terms we are setting an initial price and allowing prices to gradually fall until either the game sells out or we hit our target price. Thus we are implementing a form of dynamic pricing but unlike most systems used by other venues our prices are determined by demand not by some mysterious algorithm.
But here is the key feature of our pricing system: as prices fall, you are guaranteed to pay the lowest price you could have got by delaying your purchase. That is, regardless of what price is listed at the time you reserve your seat, the price you will actually pay is the final price.
What that means is that fans have no reason to wait around and watch the price changes and try to time their purchases to get the best possible deal. We take care of that for you.
It also removes another common gripe with dynamic pricing, different people paying different prices for the same seats. Our system is fair: since everyone pays the lowest price, everyone will be paying the same price.
We explain all of the details in the video below. If you have any questions please ask them in the comments and we will try to answer them.
The system is live right now at NUSports.com. Support common-sense pricing by heading over there now and getting your tickets for either NU v Ohio State on Feb 28 or NU v Penn State on March 7.
And Go ‘Cats!
Update: Price alerts are now available. You may send email to wildcatmarketing@northwestern.edu to be notified when prices fall. (And if you just want to know when prices reach some target p, put that in your message.)
Cheap Talk 
44 comments
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February 11, 2013 at 11:18 pm
Will Dearden
Great idea! Have you considered letting people enter reservation prices so that they automatically purchase a ticket if the price drops low enough?
February 12, 2013 at 8:10 am
jeff
This is definitely on the agenda. Right now we are working within the confines of existing software, somewhat of a kludge. When the infrastructure is there we would have “proxy bids” and price alerts.
February 12, 2013 at 12:05 pm
jeff
you may now send email to wildcatmarketing@northwestern.edu and request a price alert.
February 12, 2013 at 12:35 am
David I. Levine
I rarely attend college sports. Nevertheless, I appreciate using economics to do something useful. We cannot always predict well, but our advice can be good nevertheless: first index mutual funds, then spectrum auctions, and now Northwestern basketball tickets.
February 12, 2013 at 3:46 am
Noto
Go Buckeyes!
February 12, 2013 at 11:01 am
Sandeep Baliga
Go Wildcats!
February 12, 2013 at 5:30 am
Evan
Sounds very interesting. What are the revenue properties of this mechanism? At first glance it seems to put more weight on ensuring sell-outs than revenue maximisation.
Also, is there some potential for envy on the part of consumers? If relative prices move after the time of purchase then a consumer might find that they would have preferred to be in a different level of seat once prices are finalised.
February 12, 2013 at 8:12 am
jeff
The mechanism is very flexible to accommodate objective functions that combine attendance and revenue with varying weights. Attendance is important to NU as it is with many college athletics programs.
June 10, 2013 at 11:26 am
Mila
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February 12, 2013 at 7:31 am
PLW
lol@matt.
How does this interact with season tickets? At least for big time football, most of the revenue is from seat licenses/season tickets, not one-off games.
February 12, 2013 at 8:15 am
jeff
Definitely an issue. In the long run sales of season tickets should be optimized within an overall framework. At the moment it’s something we take as given. It has various implications but the most important one is that we have a price floor equal to the prorated season ticket price.
February 12, 2013 at 9:29 am
Anonymous
I think bidders will not have dominant strategies to buy tickets at the value here though – the last bidder to buy can wait for price to fall. If you let the price fall even after the last seat is sold and stop when the first losing bidder expresses interest, you can make it equivalent to the Vickrey auction (in fact the seminal Vickrey paper has exactly this implementation of the second-price auction). There are generalizations of this idea if bidders can buy multiple units (with decreasing marginal values).
February 12, 2013 at 10:22 am
jeff
this is true. however as a practical matter we can pretty reasonably ignore the tiny incentive effect in the mind of a buyer who doesnt know how much supply is left and imagines a tiny probability that there is only one seat left and if indeed there was only one seat left he could potentially benefit by waiting a day for the price to fall.
in other words, in a large enough market the mechanism we are using is incentive compatible for all practical purposes
February 12, 2013 at 10:38 am
Anonymous
Also, why not English auction? Start from a low price and keep raising till number of interested bidders equals number of seats – winners pay this clearing price. This will have better incentive and efficiency properties.
February 12, 2013 at 10:51 am
jeff
i disagree that the english auction would have better incentive and efficiency properties.
but anyway as a practical mechanism the dutch auction has this advantage over the english auction: a buyer doesnt have to wait around for the entire auction to clear before knowing whether or not he has a seat.
for example, in an english auction demand is larger than supply up until the auction clears. we might be very close to game day before that happens. most fans want to know they have a seat further in advance than that.
February 12, 2013 at 10:20 am
Eitan
This is really great. I love that the University is letting faculty do stuff like this.
One idea: allow users to set up at auto notification email when the ticket hits a given price. Not as complicated as auto purchase, lower transaction costs of monitoring prices, and gives good data about willingness to pay.
February 12, 2013 at 10:23 am
jeff
totally agree. don’t think its possible with current software though.
February 12, 2013 at 12:05 pm
jeff
you may now send email to wildcatmarketing@northwestern.edu and request a price alert.
February 12, 2013 at 11:15 am
Henrique
Now say that I definitely want to watch the game, but I’ll only take the good seats if they fall below a certain price. Is there an option to buy the bad seats then upgrade to a better seat if the price falls enough?
February 12, 2013 at 11:40 am
jeff
we don’t have this option. i think our idealized mechanism would involve organizing a secondary exchange running concurrently with primary sales, but this is far far beyond what we can do now.
February 12, 2013 at 11:58 am
jeff
fyi henrique all seats for Penn St. are the same price. For OSU we have some higher priced seats but the quantity remaining is very low.
February 12, 2013 at 11:23 am
Scott
Jeff and Sandeep, one obvious question al a Arkes and Blumer: If the price falls, will non-marginal ticket holders be less likely to show up to the game?
February 12, 2013 at 1:08 pm
Sandeep Baliga
Non-marginals end up paying same price as marginals so this would be beyond Arkes and Blumer – you’d have to use the fictitious price you would have paid to make your decision.
February 12, 2013 at 11:48 am
Brian
How do you set the initial price? And how often is the price reduced/updated? What happens if the initial price is too low and demand argues for an increase in the price? It seems like there’s no mechanism for this. Today, increased demand is usually dealt with in the secondary market for sports/music/theater tickets.
February 12, 2013 at 1:17 pm
jeff
indeed the initial price and the price floor are the key variables and its costly if you get them wrong. hopefully we get them right and for sure with the data that comes out of it we stand an even better chance of getting them right next time
February 12, 2013 at 12:56 pm
José Antonio Espín Sánchez
What about contingent purchases? I might be willing to pay a high price for the last 5 games only if NU is on the top 3 teams. A regular fan might be more interested in a particular game of the last 5, and not all of them.
Moreover, I might want to see all games in a playoff final/semifinal, and would like to know whether I will see all of them in advance. I derive no utility from seeing only some of the games in a final/semifinal.
It should not be that complicated to install a “naive” contingent bidding software, right?
March 7, 2013 at 3:17 am
Anoulack
This is getting a bit more sutbjceive, but I much prefer the Zune Marketplace. The interface is colorful, has more flair, and some cool features like Mixview’ that let you quickly see related albums, songs, or other users related to what you’re listening to. Clicking on one of those will center on that item, and another set of neighbors will come into view, allowing you to navigate around exploring by similar artists, songs, or users. Speaking of users, the Zune Social is also great fun, letting you find others with shared tastes and becoming friends with them. You then can listen to a playlist created based on an amalgamation of what all your friends are listening to, which is also enjoyable. Those concerned with privacy will be relieved to know you can prevent the public from seeing your personal listening habits if you so choose.
March 8, 2013 at 4:27 am
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February 12, 2013 at 5:38 pm
Joel
Not sure you answered Brian’s question. So you set an initial price and a “floor” price you are willing to go down to but what is determining the path of prices from initial to floor? Is it based on number of tickets sold/unit of time with price going down in even increments? I’m assuming your floor price delivers the minimum revenue you are willing to accept for the seats that are available at the start.
February 12, 2013 at 7:58 pm
jeff
we have scheduled a path of equal-ish increment price drops from beginning up to game day. however as this is the first time this has been done we are going to learn a lot from the sales data and we have contingency plans of speeding up or slowing down the path based on what we see.
February 12, 2013 at 6:20 pm
Pablo
Now, if you could only design a system for NU to actually win the games… 😉
February 12, 2013 at 7:59 pm
jeff
i am not a basketball expert so don’t take my word on this but my calculations suggest that if they just score more points than the other team they will improve their chances
February 13, 2013 at 8:36 am
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March 27, 2013 at 10:01 am
Jeremy Chen
Prof Ely, Nice… Great way to test a market by getting NU to buy in to it.Why about substitution between different seat classes? I’m not sure how easy it would be to coordinate multiple price points. It seems like a small combinatorial problem where the sub-market of one or more ticket class might clear independently/jointly before the rest or the whole thing might clear at once.
The question is whether it can be done in real time. But given the restriction to the Dutch auction incentive compatibility issues seem to go out the window, and it would seem very doable. Still, one step at a time.
I actually would have liked to ask your opinion on the matter of allocating public housing flats incentive compatibility in a setting where the reserve prices for the various flat classes generate “overall” cost recovery. Sort of a minimalist price mechanism. (It will have to be a first where the notion of total unimodularity appears in a proposal published by an opposition political party… albeit in some annex.)
(BTW, checked out the guitarist on YouTube. Rather subtle. Not bad.)
March 30, 2013 at 1:18 pm
Indro
Good to see economics being used in practice, yet again. Regarding the Dutch auction, it has the drawback that it does not take advantage of the pre-game build-up of excitement. I would put my money on a modified version of eBay’s method. As the time for the game nears the excitement would tend to build up and people’s willingness to pay could be expected to increase. It is perhaps the before-game excitement that would explain the existence of scalpers, too. I would like to think that only English auction can cash-in on that. Bidder’s could “Buy-it-now” at a price that keeps increasing as the “current high-bid” moves up, place a maximum-bid up to which the system will automatically place bid on the bidder’s behalf, or increase the bid in increments till the auction ends.
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October 1, 2015 at 3:51 am
Fess
The system was released in 2013, how the things are going at the moment?
Did it have any development and distribution? If it did, what was the impact on the matches’ attendance and profit?