Dynamic pricing comes to Major League Baseball

If demand caused ticket prices to go up, that dilution is exaggerated

Except that, in response to increased prices, demand would fall. Raising prices on any given day means *fewer* people would attend than might otherwise.

Yeah, demand would fall due to higher ticket prices for those that pre-purchase theirs, but the majority of people don't do that. Those who show up at the gate would encounter the higher ticket prices and heavier crowds, and thus longer lines, etc.

I guess you're making the assumption that, over time, this pricing method would result in the majority of park guests pre-purchasing, as is done with passengers purchasing airline tickets. The problem with that comparison, to me at least, is that you're comparing a system that has existed for 2 decades to one that you'd essentially be springing on people. If most park-goers aren't saavy enough to save money and time by pre-purchasing (as is the case now), we can't assume they'd take to this pricing system right away, can we? I'm suggesting that in the interim, the diluted experience would potentially hurt the parks more than it would help.

Clearly, this wouldn't be done overnight. It would be done in small steps, much like the Giants are doing it.

But, finer-grained pricing can only help both the customer and operator. It allows the operator to better manage yields, spreads crowds away from "popular" days, and allows the bargain-hunting customer easier access to bargains. In exchange, those who must (or most want to) visit on "popular" days may end up paying more.

I'm convinced it will happen in some form. The only question is when, and in how many steps.

(And, I don't know if this has been mentioned, but the Cedar Point spam in my inbox today included a link to discounts for Tuesday-Thursday May and early June.)

Once again, while I was pecking away on this response, Brian got in there before me....

Lord Gonchar said:

Thinking is hard sometimes. I find squinting at whatever I'm looking at or working on helps. And so does doing that weird thing where your tongue kind of sticks out of the corner of your mouth when you concentrate on something really intensely.

I don't really have anything to add to this quote. I just enjoyed it so much I thought it was worth sharing again. :)

The thing for me on this topic is that too much focus is being put on the variables that might be used to determine when a price adjustment should occur. The variables themselves do not drive the price. It's the attendance that occurs because of the variables that will cause a change in price.

In other words, the park is studying customer behavior as it pertains to certain elements and establishing prices accordingly. The park knows their busiest attendance days are Saturdays in July for example. They set their highest price point for those days. It can never be higher than the market will bear. Never.

Then as the park determines they are likely to have lower attendance days they will want to either entice new people to come in or even shift some of the attendance from those busiest days (which don't forget, helps the park to maximize the return on their daily operating expenses), so they lower the gate price.

The customer thinks they are scoring big because of the discount and they didn't even have to plan ahead. Not to mention, what would have been a limited experience day at the park on the busiest day now becomes a nicer experience.

So, you wonder about the folks who have to plan their visits far in advance or cannot negotiate the Saturdays in July or just don't want to take a chance on prices. Those folks are the pre-paid ticket market.

But yeah, the ticket prices will never be higher than the park will be able to charge in order to maximize attendance. That would defeat the purpose completely.

Brian Noble said:

...those who must (or most want to) visit on "popular" days may end up paying more.

And that's exactly where I see the problem. Again, I'm not taking issue with discounting lower-attendance days, because I think that's a great way to encourage attendance on what would otherwise be a low income-to-operating cost day.

What I'm questioning is whether its a smart move, in the long run, to raise ticket prices on, as with Carrie's example, Saturdays in July. The case being made is that by raising prices on those days, you encourage visits on other days. I get that.

But if people simply cannot visit on a Tuesday in early June, and have no other option than to visit on a busy Saturday in July (as seems to be the case, based on attendance trends), and they arrive to find higher ticket prices in addition to long lines, their experience will be of lower perceived or actual value than it would have been at the "regular" ticket price, no?

I suppose one solution to this would be to simply raise the "regular" ticket price to the busy Saturday in July price, but the price point being too low isn't the concept I'm questioning.

djDaemon said:

But if people simply cannot visit on a Tuesday in early June, and have no other option than to visit on a busy Saturday in July (as seems to be the case, based on attendance trends), and they arrive to find higher ticket prices in addition to long lines, their experience will be of lower perceived or actual value than it would have been at the "regular" ticket price, no?

Possibly. But I don't think it's necessarily an actionable thing. Currently, at Hershey you can purchase admission tickets at Giant for $10 to $15 less than the regular price. So, if I attend Hershey in May my price will be $36.95. If I attend in June, my price will be $41.95. If I can't attend in either of those months, I will go to the park and pay $52 and the crowds will likely be greater and the lines longer and the temperature hotter.

You can argue those $52 price folks are having a lower perceived or actual value. But it seems to be working for Hershey.

I don't know that its fair to include discounted tickets in the discussion, since its obvious that that majority of people don't even pre-purchase. I get what you're saying, though - its $15 "more" on a busy day in July than it is in May, and that works for Hershey. But how many people know about and take advantage of this? As has been mentioned, the lines I've seen at CP's ticket booths suggest its not many.

dj, you are totally missing it. If you raise the price on a Saturday in July, *some* of those people will change to other days. It doesn't matter if all of them can't. Those who can change dates pay less. Those who can't change dates pay more, but get a less crowded park than "it would have been."

This is micro-economics 101 stuff here.

Well then, I guess I should go back to college..

On second thought, maybe its not me. If what you say is true - that the incentive of lower cost will drive a significant number of people to visit on other days - why don't a significant number take advantage of discounts?

Well, they do if they care. Otherwise they are willing to attend on the busier days and take whatever they get.

You don't need everyone to do it. You just need *enough*. There's no magic lower price that gets everyone to change plans, just as there is no magic higher price where suddenly everyone says "too much", but for $1 less they'll all still come. But, lowering the price gets a few more people interested, and raising the price gets a few more people to say, "I'd rather go to the lake/ballgame/concert/work around the house."

Ideally, there's a function that is monotonic, continuous, and differentiable that describes how price influences demand. In practice, it doesn't quite work out that way, but it's close. Learning the shape of that curve is the hard part: setting the prices correctly to exploit this while maximizing revenue isn't necessarily obvious, but if you have all the data, it's a lot easier. And, the operator has all the data.

Edited to add: you are trying to claim that theme park demand is inelastic---price just doesn't matter. That's almost never true for luxury/leisure-time activities.

But are they willing to attend on the busier days at the higher/increased price?

And, going further, will their experience be good enough at the lower value to warrant a return trip?

Brian - I'm not trying to claim anything - I'm simply asking. But since I'm obviously intellectually inferior to you, I'll concede and be on my merry way.

You keep asking this question as if there is only one, binary answer: either everyone will, or everyone won't. Different people have different threshholds, so some people will. Those who won't will find other days to come, or they will do something else.

Again: picking the price that balances all this is the key---and you need the data and experience to do it correctly. The kicker is: most amusement/theme parks measure their guests eight ways from sunday, and know exactly how they will react to changes.

(Edited: well, not exactly, but they've got a pretty good idea.)

For example, most know precisely the "number of rides" that their guests, on average, will need to experience to consider the day "good" given a particular price point.

I understand your points, dj. The thing is that if the answer to either of those questions is no for a large number of people (with large being defined by the park), then they will have to make another adjustment. But that doesn't negate the positive effect of having a tiered pricing plan.

Call me a fence rider but I can see both points of view, however I can see dj's point more clearly. I am struggling with how to answer some questions. If there are discounts already available for the early months of the season why is that not enough incentive for people to hit the parks in the slow months right now? Why aren't the lines in the middle of July not enough incentive by themselves to make me rethink my plans and go in June?

Well, I would have to answer with a question. What makes you think the early season discounts aren't shifting people right now? Imagine what things would be like without that incentive.

The funny thing is that there are still plenty of people ready to pay whatever to go in July. So there is room for additional price indexing to make that potential shift (or maximum profit potential) greater.

Let me throw something else in the mix. If the average price paid ends up being the same, which is pretty likely if some are higher and some are lower, then what is gained by the park after the expense of implementing the system? I think we can all agree that attendance at established parks isn't going to change much beyond the annual, elastic change we normally see. If they don't make any more money, there's no point.

^^Exactly. I wonder why parks don't discount early season and weekdays even more.

As everyone has mentioned, there are some (many?) people who will go on a Sat. in July no matter how crowded it is and no matter how long they have to wait in line. Imagine if you could give them a premium experience for a premium price instead - no crowds but at a cost. How would you do it? Discount the price on other days. Now the people who move to weekdays are happier because they have a better price/convenience/fun ROI and the people who are left have a better price/convenience/fun ROI (because there's less people in the park).

And I distinctly remember when GAdv. opened KK and then it broke itself there were a lot of people who put off their planned visits to the park until the ride opened. That to me seems the perfect opportunity to dynamically price without having to do a day to day. Just say, "Tickets for the next 3 weeks are $15 off" with no explanation.

And for what it's worth, SFoT now has an "early season pass" which is about the price of a day admission and gets you unlimited entry through Memorial Day.

Edit: Jeff snuck in.

Jeff said:
If the average price paid ends up being the same, which is pretty likely if some are higher and some are lower, then what is gained by the park after the expense of implementing the system?

I have to believe attendance will go up because guest experience will improve. The people who can move to a cheaper day will get better value (or they wouldn't have moved) and the people left on the expensive day will have a less crowded park.

Jeff said:
If they don't make any more money, there's no point.

I think it's officially my shift, so let me punch in and give my perspective...

I have to go back to the Giants. The reasoning is when they're playing well or playing a particularly interesting or important matchup, the price goes up to maximize revenue. But when things are down and the team is doing poorly or the opponent is an uninteresting matchup or it's late in the season and the games don't matter the price drops in hopes of bringing out people that otherwise wouldn't have come.

I think the same thing applies to the park. It's two fold approach. Get more from the people who come no matter what and then draw more people on days when the crowds are low.

It's not just about shifting crowds (and admittedly, its something the 'pro' side has been focusing on), but also about increasing revenue of your guaranteed audience and also drawing new or repeat visits on those slow days with lower prices.

Like Brian said, it's about finding that balance. Once you do it's being as efficient as possible by adjusting to the market conditions rather than taking a 'one size fits all' approach.