Wednesday, June 5, 2013

Do the Rolling Stones Need to Price Discriminate More?

So claims Peter Smith in "Demand elasticity and variable pricing as illustrated by the Rolling Stones." He noted that the recent show at the Staples Center in Los Angeles did not sellout its allocation of $600 seats as expected. Instead, the concert promoter released extra $85 seats to fill the arena. This was the launching point for a discussion of concert price discrimination (called 'variable pricing' in the article). The trick is to identify less elastic customers from more elastic customers and there are mechanisms.
The other interesting point to note in the tickets market is the growth of premium tickets. That might mean you get into a “VIP area”. Or even a meet and greet with the band, a signed picture or something.

1 comment:

  1. I don’t necessarily see this as direct price discrimination. According to Froeb, “price discrimination is the practice of charging different people or groups of people different prices that are not cost-justified.” The cost is not different for men and women. Men might end up paying more than women, but that isn’t because of price discrimination. According to an article from the Wall Street journal, “men aren’t major comparison shoppers and they’re willing to pay a little more to speed up the process than to spend time hunting down bargains.” This article wasn’t referring to lingerie shopping, but all shopping. If we accept that this scenario with Victoria’s Secret is just attributed to human behavior, then price discrimination doesn’t factor into it. Now, it may be reasonable to say that Victoria’s Secret “discriminates” in their advertising since they target women, but that does not have a direct influence on the cost of goods.