The Role of Price Tiers in Advance Purchasing of Event Tickets

30 Pages Posted: 13 Aug 2007 Last revised: 4 Apr 2012

See all articles by Wendy W. Moe

Wendy W. Moe

University of Maryland - Robert H. Smith School of Business

Peter Fader

University of Pennsylvania - Marketing Department

Date Written: January 2008

Abstract

Advance purchasing is common in several product markets (e.g., concerts, air travel, etc.) but has generally been understudied in the marketing literature. Research to date has focused primarily on the analytical modeling of optimal pricing policies. Our work complements this literature by focusing on the empirical modeling of advance purchasing and the effects of price on consumer purchasing behavior. Since pricing strategies in practice are typically more complex than simply setting a single price point, we consider multiple aspects of price: (1) the existence and use of multiple price tiers (generally based on seat quality), (2) the face value of each ticket, and (3) discounts that result in week-to-week variations in price. We show that failure to account for price tiers can lead to exaggerated inferences about the role of price over time. To sort out these effects, we develop a tier-specific Weibull timing model to describe sales arrivals for event tickets in the advance selling period, using a proportional hazards framework for the time-varying covariates. Additionally, we include a component that captures the role of similar covariates to explain spot market purchasing. Our empirical findings reflect substantial differences across tiers. Purchasers in the high-priced tier tend to buy earlier in the selling period and are influenced by price discounts/premiums in the spot market. Purchasers in the low- and mid-priced tiers tend to delay purchasing and are influenced only by face value prices in the spot market. Advance purchasers are not influenced by any aspect of price (after accounting for differences across price-tiers), and this holds true across all price tiers for our dataset of 22 family events. We discuss the implications of these empirical observations for future modelers.

Keywords: Advance Selling, Advance Pricing, Event Tickets, Price Tiers, Spot Market, Entertainment Marketing, Weibull Hazard Model, Hierarchical Bayesian Analysis

JEL Classification: M31, L82, C41, C11

Suggested Citation

Moe, Wendy W. and Fader, Peter, The Role of Price Tiers in Advance Purchasing of Event Tickets (January 2008). Available at SSRN: https://ssrn.com/abstract=1005726 or http://dx.doi.org/10.2139/ssrn.1005726

Wendy W. Moe (Contact Author)

University of Maryland - Robert H. Smith School of Business ( email )

College Park, MD 20742-1815
United States

Peter Fader

University of Pennsylvania - Marketing Department ( email )

700 Jon M. Huntsman Hall
3730 Walnut Street
Philadelphia, PA 19104-6340
United States

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