Purple Pricing Hits The Nail On The Head
A great write-up at Crain’s Chicago Business of the tremendous success we had with Purple Pricing for the Northwestern-Ohio State football game. A key quote:
The modified Dutch auction system, which guarantees that buyers don’t pay any more for tickets than anyone else in their section, ended up selling out at $195, $151 and $126 for seats on the sideline, corner and end zones, respectively.
On the secondary market, sideline seats have sold for an average of $190, corner seats for $135 and end-zone seats for $127. That suggests that fans haven’t been able to flip them for a profit — at least, not yet.
Me On UsesThis.com
It’s a pretty cool blog, they ask people from different walks what their productivity setup is. I am a control freak when it comes to my hardware/software. I have always relied on Linux and other free software because of the low-level control it affords and I run in fear every time our IT department offers “support” for the few pieces of commercial software I use. Recently though I just don’t have as much time to get my hands dirty with rolling my own, so to speak, and Apple hardware with its out-of-the-box beauty and Unix under the hood has been a good compromise for me. In the interview I talk about the advantages of running your own mail server. Email, particularly “selfies” (not that kind), is an undeappreciated organizational/productivity tool.
I was interviewed for about 45 minutes about auctions, purple pricing, sports, advertising and in the end they went with an off-the-cuff crazy suggestion I made at the very end of the interview.
HBR Ideacast on Dynamic Pricing
Sandeep Baliga and I are interviewed by Sarah Green for the HBR Ideacast. The topic is dynamic pricing from airlines to sports.
Based on this article in the HBR blog:
Northwestern Makes List of Top 10 Most Innovative Companies… In Sports!
From Fast Company:
For redefining ticket sales. Under the direction of two in-house economists, the university is testing out a new ticket-selling system for some of its games. It’s called “Purple Pricing”—like a Dutch auction, but with a twist: Prices start high and drop until tickets sell out, and fans buy whenever a price is appealing. There’s no risk of overpaying (like, say, on StubHub, where prices fluctuate) because everyone pays the final price. So if a fan buys at $50 but the price drops to $40, the fan is refunded $10. The system gives the school precise data about the market value of its tickets, ensuring more revenue and less scalping, and presenting a new path for a messy ticketing industry.
The Best Piece On The Economics Of Ticket Sales
Daniel Krieger wrote this for FastCompany magazine and someone named Jeremyville added some fantastic illustrations. Click on the full-color slideshow at the top to see the full print version of the article. A key point I tried to make is that the secondary market is very important to primary sellers. Primary sellers are both less patient and more risk averse than brokers. Brokers provide a valuable service by purchasing tickets early and at a fixed price. Primary sellers effectively offload the risk of price volatility to the brokers. In exchange for this service they give the brokers low prices and (on average) re-sale rents. This is a key economic force that explains many seeming anomalies in the ticket market. But the way the industry is evolving, primary sellers will soon essentially vertically integrate with the brokerage market by issuing electronic, non-transferrable tickets and organizing an internal exchange in order to capitalize on efficient re-allocation without leaving rents to brokers and without cannibalizing primary sales.
Kellogg Podcast on Sunk Costs
Sandeep Baliga and I discuss our research on the evolutionary origins of the sunk cost fallacy. It’s an example of a kludge, this particular one being a workaround for our limited memory capacity. There is a general theme here which I tried to capture with this bit:
We go around in our lives and we collect information about what we should do, what we should believe and really all that matters after we collect that information is the beliefs that we derive from them and its hard to keep track of all the things we learn in our lives and most of them are irrelevant once we have accounted for them in our beliefs, the particular pieces of information we can forget as long as we remember what beliefs we should have. And so a lot of times what we are left with after this is done are beliefs that we feel very strongly about and someone comes and interrogates us about what’s the basis of our beliefs and we can’t really explain it and we probably can’t convince them and they say, well you have these irrational beliefs. But its really just an optimization that we’re doing, collecting information, forming our beliefs and then saving our precious memory by discarding all of the details.
I really wish I could formalize this idea. Anyway, here is a link to an article about the research and the podcast.
My Suspense And Surprise Talk at MSR
This was a fun talk to give.
Watch and listen at: https://vimeo.com/55698621
The Wall Street Journal Numbers Guy blog covered my auction scrabble idea.
Besides learning that Scrabble can be fun for him when incorporating economics, Ely got some preliminary data on the true value of tiles. Aficionados of the game know that a blank — which can be played as any letter — and S are valuable because they can be used to form so many words. Therefore, playing them on the board is worth just 0 or 1 point, respectively — the tiles’ value comes from the other letters whose usage they make possible. Conversely, Q and Z aren’t part of as many words and are hard to play, so playing them brings a bonus of 10 points (not counting triple word scores and the like).