You’ve probably never heard of “Purple Pricing.” But you’ll like that it gives you a chance to snag sports tickets below face value, without resorting to haggling, scalping, or timing the market right.
At Northwestern University, a “Purple Pricing” experiment has been launched—purple being the college’s color—in the form of a curious online auction. The men responsible for the idea are Jeff Ely and Sandeep Baliga, both economics professors at Northwestern who operate the Cheap Talk blog. The two econ wonks have taken a special interest in the way that tickets for concerts, sports contests, and other events are priced. Previously, for instance, they’ve suggested that arenas should buy back unwanted tickets on the cheap so that they can be resold for an extra profit, rather than see them wind up at a secondary market such as StubHub.
Now, Ely and Baliga are launching what they think will be “a revolutionary way to sell tickets to sporting events (and someday theater, concerts, and restaurants).” They are consulting on what they describe as “a uniform price multi-unit Dutch Auction” for tickets to two upcoming Northwestern home basketball games, versus Ohio State on February 28 and Penn State on March 7. What does such an auction entail? The two explained in a post:
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.
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Normally with dynamic pricing, ticket prices go up or down, and the buyer is locked in at the specific price based on whatever time he or she pulls the trigger. In the Northwestern experiment, however, prices only change in one direction as time passes—they go down, never up. Also, everyone who agrees to purchase according to “Purple Pricing” rules winds up paying the exact same price, regardless of when a reservation was made or the price point at the time. If the price drops after you’ve purchased tickets, you get the difference refunded.
“Dynamic pricing is unfair,” says Baliga in a video accompanying the “Purple Pricing” announcement, “because different people pay different prices for essentially the same seats.”
For the specially sold tickets for the two upcoming games, however, fans will pay the same price for tickets in the same section. The hope is that it will eliminate the bad feelings that come as a result of finding out, in airline travel style, that the person next to you paid half of what you did.
Previously, fans had an incentive to game the system and try to scoop up tickets on the cheap via secondary sellers at the last minute. Now, the economists wrote, “fans have no reason to wait around and watch the price changes and try to time their purchases to get the best possible deal”:
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.
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Northwestern’s announcement also plays up the angle that because of the unique sales format, fans should feel free to purchase their tickets sooner than later:
So you have nothing to lose by securing your seats right away because the final price you pay will be the best price you could have paid by waiting.
But what happens if the tickets don’t sell out? If ticket prices keep on decreasing, wouldn’t that mean that, in theory, all participants could wind up getting their seats for $1, or even 1¢? Well, no. That’s why there’s a rule stipulating that prices will fall until “either the game sells out or we hit our target price.”
So what’s the target price? We’ll have to wait and see. It seems like target prices will be based on how quickly (or not) tickets are selling.