Are Premier League tickets too expensive?

There has been a lot of media coverage recently on the cost of attending Premier League football matches. One particular focal point was a protest by Liverpool supporters over plans to charge £77 for a ticket. In response to this protest the owners of Liverpool back-tracked and said they would keep prices pegged at current levels (where the highest price is £59). But, why should prices not go higher?

The data on Premier League attendances shows that, for the vast majority of games, stadia are full. And there is no doubt that many more would attend if they could get tickets. Such excess demand clearly means that plenty of people are willing to pay high prices. This gives a strong rationale for clubs to push prices higher and increase profit. Indeed, it is what the economic textbook says they should do.

But, the main consequence of an increase in prices is to extract surplus from supporters. Essentially supporters are pushed to the point where they are only just willing to pay to go to matches. This takes away the enjoyment of the football experience. And that is a problem because of the fairly unique nature of football.

The supporters of a club are an integral part of what that club is. This can manifest itself in many, many ways - support spurring the team on to victory, bailing out the club in hard times etc. In economic terms this means that the value of the club (and its ability to generate income) depends on its fans. Moreover, it means that fans can legitimately claim part ownership of the club. Note that this is different to most other goods. A restaurant, for example, fills up on a Saturday evening because it produces good food and not because it has a loyal fan base who cheer on the waiter.

Once we position supporters as having legitimate claim to part ownership of a club it becomes hard to justify high prices. Supporters deserve something and a ticket they can easily afford is probably a fair compensation. To say, therefore, that supporters can afford to pay high prices is not enough to justify them. And it is worth remembering that gate receipts are a relatively small proportion of revenue. At Liverpool, for instance, they are only around 20%. Much more money comes from TV rights. To squeeze every penny out of fans does not, therefore, make sense.

The protest at Liverpool showed the genuine bargaining power that fans have, if they can coordinate themselves. The owners U-turn showed good common sense.

Comments

Revealed preference, WARP, SARP and GARP

The basic idea behind revealed preference is incredibly simple: we try to infer something useful about a person's preferences by observing the choices they make. The topic, however, confuses many a student and academic alike, particularly when we get on to WARP, SARP and GARP. So, let us see if we can make some sense of it all. In trying to explain revealed preference I want to draw on a study by James Andreoni and John Miller published in Econometrica . They look at people's willingness to share money with another person. Specifically subjects were given questions like: Q1. Divide 60 tokens: Hold _____ at $1 each and Pass _____ at $1 each. In this case there were 60 tokens to split and each token was worth $1. So, for example, if they held 40 tokens and passed 20 then they would get $40 and the other person $20. Consider another question: Q2. Divide 40 tokens: Hold _____ at $1 each and Pass ______ at $3 each. In this case each token given to th

Nash bargaining solution

Following the tragic death of John Nash in May I thought it would be good to explain some of his main contributions to game theory. Where better to start than the Nash bargaining solution. This is surely one of the most beautiful results in game theory and was completely unprecedented. All the more remarkable that Nash came up with the idea at the start of his graduate studies! The Nash solution is a 'solution' to a two-person bargaining problem . To illustrate, suppose we have Adam and Beth bargaining over how to split some surplus. If they fail to reach agreement they get payoffs €a and €b respectively. The pair (a, b) is called the disagreement point . If they agree then they can achieve any pair of payoffs within some set F of feasible payoff points . I'll give some examples later. For the problem to be interesting we need there to be some point (A, B) in F such that A > a and B > b. In other words Adam and Beth should be able to gain from agreeing.

Some estimates of price elasticity of demand

In the textbook on Microeconomics and Behaviour with Bob Frank we have some tables giving examples of price, income and cross-price elasticities of demand. Given that most of the references are from the 70's I'm working on an update for the forthcoming 3rd edition. So, here is a brief overview of where the numbers come from for the table on price elasticity of demand. Suggestions for other good sources much appreciated. Before we get into the numbers - the disclaimer. Price elasticities are tricky things to tie down. Suppose you want the price elasticity of demand for cars. This elasticity is likely to be different for rich or poor people, people living in the city or the countryside, people in France or Germany etc.etc. You then have to think if you want the elasticity for buying a car or using a car (which includes petrol, insurance and so on). So, there is no such thing as the price elasticity of demand for cars. Moreover, the estimated price elasticity will depend o

Behavioral Game Theory

Search This Blog