Speaker: Bikram Ghosh, Associate Professor of Marketing, University of Arizona
Presentation Title: Contingency Selling Under Product Uncertainty and Service Capacity Constraint: A New Pricing Model with Applications to Sports Events
Abstract: In this paper, we propose a new pricing model for markets where the product is sold in advance with uncertainty and the seller faces capacity constraint in the supply. Tournament ticket sales in sports events, where it is uncertain which team will appear in a particular game, is a typical example. Our pricing model enables the seller to price the tickets in a contingent fashion—some tickets will be valid only when a certain team gets into the game, and other tickets are valid when another team gets to play. When ticket buyers have sufficiently different preferences for the teams who may play in the game, selling these “contingency ticket” better matches the ticket price with the willingness-to-pay of the fans of specific teams, thus generating higher margin per seat for the seller, than the traditional way of selling general tickets. We further show that the proposed pricing model continues to be advantageous for the seller when secondary markets exist, where buyers can trade tickets once they know which team will be in the game.
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