Commetary

The article deals with the raise in stadium tickets prices by some teams which participate in
the NFL (National Football League). In brief the average price of the ticket for football games
increased by 4.7% even though 15 teams out of 32 managed to keep steady or lower price.
Knowing that the market price is defined by the intersection of the Demand and Supply
Curve, understanding how they work is essential.
The maximum availability of seats is fixed in a stadium, thus the supply curve is perfectly
inelastic, and meaning that for a change in price there is no in change in supply. A shift of
supply may occur when changing stadium, but this requires huge investment and many years
to be realized; therefore we dont consider it in this commentary. We are assuming the
manager wants to sell all tickets because if not the match doesnt pass on local TV and TV
publicity may be a good resource of income; thus there is a strong incentive to do so, this is
sometimes achieved by offering price breaks on other services in the stadium such as parking
spots.
The demand curve reflects the expectation of local consumer; this is why ticket price policies
differ so widely. Once the manager has fixed a price the three following cases may happen:


A. The demand curve intersects the supply curve below the chosen price, leading to
an excess of supply, causing allocative inefficiency.
B. The demand curve intersects the supply curve above the chosen price, leading to
an excess of demand, causing allocative inefficiency.
C. The demand curve intersects the supply curve at the chosen price, meaning the
market Equilibrium had been achieved.

To avoid situations B and C the manager should estimate for what price the demand and
supply curves intersect; therefore has to understand the demand and analyse different
determinants.
Demand is determined by how many fans the team has and how much they are attracted by it.
The number of fans is given by the team results, positions in past tournaments, famous players
they have. If the team is well known it will have many fans, thus more people are willing to
buy tickets causing a high demand.
If the local population is numerous, normally demand will be high, because by probability
there are more people who are willing and able to spend money than a smaller local
population. If the unemployment rate is high, a lot of people do not have the ability of buying
tickets causing a low demand.
After having analysed these determinants the manager should have an idea on what price to
charge for his teams tickets.
The manager may believe that local TV isnt a necessary source of revenue; therefore he can
try selling at higher price less tickets; in order to avoid losses he must understand the Price
Elasticity of Demand, meaning the responsiveness of quantity demanded given a change in
price.
The PED has two main determinants: The number of closeness of available substitutes and
the power of addiction of the good. The fewer substitutes the more inelastic the demand. A
NFL match doesnt have any close substitutes; someone can choose to watch football matches
at the stadium or at home. If a good is addictive, consumer will buy it no matter the price.
Going to the stadium, for most people that tried it, is the only way to watch a match; therefore
it can be considered addictive.
From these three determinants, we can figure out the demand curve is relatively inelastic, thus
a change in price leads to a relatively smaller change in quantity demanded.


From the graph we can see that as the price changes from P0 to P1, the team loses the red
area revenue (as revenue is calculated from quantity x price), but gains the blue area. If the
blue area is bigger than the sum of the red area and the additional revenue from the
television, then the manager will choose to set higher prices and sell lower quantity of tickets.
Setting prices isnt as easy as it seems. In real life creating a demand curve for a certain good
is a tough job, thus in most markets for goods there is an excess of supply or demand. The
managers job is to reduce the excess as much as possible by understanding the signals and
incentives.