The Art of Alienating Your Fans: Two-Part Tariffs in Professional Sports

It has long been an understanding by the owners of professional sports teams that their fans are completely irrational about their favorite teams. What an advantage that must be when setting prices for season tickets. Even better, how about extracting extra revenues from those fans whose demand is trending towards being inelastic by requiring them to pay an entry fee in order to purchase season tickets? Well that is what the owners of the New York Jets are doing to their fans beginning in 2010 when they open up their new stadium. In an article titled "Playoff Run May Drive Seat License Demand" it is stated that, "More fans will be willing to pay these steep increases in admission costs for Jets games beginning next season thanks to the team's march through the playoffs..." Those steep increases are mainly due to the implementation of "Personal Seat Licenses": the dreaded entry fee paid by fans for each seat they demand for the ability to purchase season tickets to home games. The usage of personal seating licenses has taken place dating back to 1986, now being used in all professional sports ranging from the National Football League to the National Rugby League.

The concept of using personal seat licenses in professional sports is a perfect pricing strategy for their season ticket holders due to the unwavering demand by the fans for tickets to these live sporting events. Not only does the purchasing process separate the high demand and low demand consumers (personal seat licenses for the Jets range from $4,000/seat in the upper levels of the stadium to $30,000/seat for the absolute best seats), but it also extracts the most possible consumer surplus away from the fans. Although fans are predictably irrational, they also live within their monetary means. The front office for the Jets realized this and had an opportunity to lower the per-game price of tickets in some areas by 50%, further lowering the variable price of the two-part tariff to marginal cost. However, the personal seat license prices will remain the same. Some fans refuse to purchase personal seating licenses and have been extremely outspoken about the gouging of prices, but due to the recent success of the team there is little worry that every personal seat license will be purchased before the start of the 2010 NFL season.

- Randy Abbott, Jeanette Elliot, Dan Furey, and Jordan Smith