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Equilibrium Price Dynamics in Perishable Goods Markets: The Case of Secondary Markets for Major League Baseball Tickets

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  • Andrew Sweeting

Abstract

This paper analyzes the dynamics of prices in two online secondary markets for Major League Baseball tickets. Controlling for ticket quality, prices tend to decline significantly as a game approaches. The paper describes and tests alternative theoretical explanations for why this happens in equilibrium, considering the problems of both buyers and sellers. It shows that sellers cut prices (either fixed prices or reserve prices in auctions) because of declining opportunity costs of holding onto tickets as their future selling opportunities disappear. Even though prices can be expected to fall, the majority of observed early purchases can be rationalized by plausible ticket valuations and return to market costs given product differentiation and uncertainties about ticket availability.

Suggested Citation

  • Andrew Sweeting, 2008. "Equilibrium Price Dynamics in Perishable Goods Markets: The Case of Secondary Markets for Major League Baseball Tickets," NBER Working Papers 14505, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:14505
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    Cited by:

    1. Phillip Leslie & Alan Sorensen, 2009. "The Welfare Effects of Ticket Resale," NBER Working Papers 15476, National Bureau of Economic Research, Inc.
    2. Gonca P. Soysal & Lakshman Krishnamurthi, 2012. "Demand Dynamics in the Seasonal Goods Industry: An Empirical Analysis," Marketing Science, INFORMS, vol. 31(2), pages 293-316, March.
    3. Jonathan Levin, 2011. "The Economics of Internet Markets," Discussion Papers 10-018, Stanford Institute for Economic Policy Research.
    4. Graddy, Kathryn & Hall, George, 2011. "A dynamic model of price discrimination and inventory management at the Fulton Fish Market," Journal of Economic Behavior & Organization, Elsevier, vol. 80(1), pages 6-19.
    5. Tim Dittmer & Bob Carbaugh, 2014. "Major League Baseball: Dynamic Ticket Pricing and Measurement Costs," Journal for Economic Educators, Middle Tennessee State University, Business and Economic Research Center, vol. 14(1), pages 44-57, Fall.
    6. Daniel, Rascher & Andrew, Schwarz, 2010. "Illustrations of Price Discrimination in Baseball," MPRA Paper 25807, University Library of Munich, Germany.

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    JEL classification:

    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • L81 - Industrial Organization - - Industry Studies: Services - - - Retail and Wholesale Trade; e-Commerce

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