Consider a team selling tickets for its upcoming baseball season. Before the season begins it offers a bundle of tickets for every game. Some of these games however are certain to have very low attendance (games on a Tuesday, games against poor opponents, etc.) The tickets for these games will be placed on the secondary market at very low prices. Indeed one of the biggest problems for teams is the inability to prevent those secondary market prices from falling so low that they cannibalize single-game box office sales. The problem is so severe that many baseball teams are making arrangements with StubHub to enforce a price floor on that exchange.
The problem has a much simpler solution: stop selling season tickets. The team should instead offer the following type of bundle: you may purchase tickets for all of the predictably high-demand games at the usual season ticket discount.Then you may add to that bundle any subset of the low-demand games you desire but each at a price equal to the face value of the ticket.
This arrangement will make both season ticket holders and the team better off. Season ticket holders will opt not to add the low demand games (unless the opponent is a team they really like for example) and since they weren’t going to those games anyway they are saving money.
The team will increase revenue: supply of tickets to low demand games will be controlled. Secondary market tickets will be priced at or near face value because nobody will buy a ticket at face value for a lousy game unless they actually plan to use the tickets. This enables the team to hold prices at their desired (i.e. revenue maximizing) level without cannibalism.
Cheap Talk 
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February 27, 2013 at 11:31 pm
Jake
Are you sure teams care about the lower resale market? It’s possible they’re making at least as much on concessions/merchandise meaning they’re fine making less on tickets if it means a butt in a seat. Without both cheaper seats on the resale market and an impetus for season ticket holders to try to get rid of their seats, attendance might be lower.
Ex, I might choose to attend a Wizards game if I can find a $10 seat on resale in a decent section, knowing I’ll buy a couple beers. But there’s no way I’m paying $25 for a 400 level seat.
Now I guess teams could solve this by adopting a more dynamic pricing scheme, but I’m guessing you’d see less people actually going to games without season ticket sales.
I also wonder whether it makes sense to offer season tickets for anticipated high-volume games without forcing buyers to buy the whole package for more money.
February 28, 2013 at 9:10 am
jeff
good point the concession revenue definitely needs to be taken into account. its why the optimal quantity of tickets sold is larger than a naive revenue maximizing calculation would imply.
February 27, 2013 at 11:39 pm
Lones Smith
I am confused. Why does it matter whether the supply for tix to a low or high demand game comes from season ticket holders or the college itself? Wouldn’t the same price arise? It might help for you to construct an example with a high and low demand game, and show how your proposed solution helps. I thought this bundling theory was well studied since my former colleague Jim Adams wrote the seminal paper in 1976… i.e. the monopolist should bundle when values are negatively correlated. So is your point simply that this is an unreasonable assumption — if you really like one game, you’ll really like the other — so that bundling is dumb?
February 28, 2013 at 1:05 am
jeff
The supply will be too high hence the price too low. The team could repurchase tickets from the secondary market to reduce supply as I have suggested before but this is effectively a way to do that at the initial stage.
I am not sure that the bundling theory applies when there is a secondary market for the individual items.
February 28, 2013 at 9:08 am
jeff
lones: here is your example. go to your whiteboard and draw a demand curve. pick any price and call it the desired box office price. (for example it could be the revenue maximizing point where marginal revenue equals zero, but it really doesn’t matter.) now look at the quantity Q associated with that.
if the number of season ticket holders who will supply their tickets to the market exceeds Q (this, formally, is what a “low demand” game means) then the secondary market price will be below the desired box office price and the team will not be able to support that price.
let P be the price on the secondary market in the above outcome. the team could remove this game from the season ticket bundle, and reduce the price of the bundle by P. This makes season ticket holders no worse off (because they were just going to sell these tickets at price P anyway). And it makes the team strictly better off by keeping supply down and price high.
February 28, 2013 at 4:54 am
Sune Kristian Jakobsen
Why not make the season tickets personal, or make them one ticket instead of a bundle of tickets, so people can’t sell a subset of the tickets?
February 28, 2013 at 9:09 am
jeff
this may not be desirable because many groups buy season tickets to share among them.
February 28, 2013 at 6:04 am
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February 28, 2013 at 7:57 am
Matt
Buyers pay a premium for the flexibility of the season ticket package – they don’t need to sit down and scrutinize the schedule of games to determine their willingness-to-pay for each game. If you parse up the package this way, you’ll lose out on the extra rents available due to this premium.
March 3, 2013 at 2:07 am
Jonas
I agree with Matt