Price Discrimination In Broadway Theatre
Price discrimination in Broadway Theatre
Phillip Leslie∗
A common thread in the theory literature on price discrimination has been the ambiguous welfare effects for consumers and the rise in profit for firms, relative to uniform pricing. In this study I resolve the ambiguity for consumers and quantify the benefit for a firm. A model of price discrimination is described which includes both second-degree and third-degree price discrimination. The model is designed to analyze ticket sales for a Broadway play. Heterogeneous consumers choose between tickets for various seat qualities, tickets sold at a discount booth, and tickets requiring a coupon available to a subset of the potential consumers. Using data from a Broadway play, the structural …show more content…
In other words, there is some reason to view this source of price variation as being exogenous. To the extent that the time-series variation in the coupon price is not exogenous, the demand specification includes time-of-week dummies, a quadratic time trend and a dummy for after the Tony Awards which took place in the middle of Seven Guitars run. These variables should control for many of the obvious explanations of this price variation. The remaining variation in the coupon price over time may be an exogenous component. The second type of discount is the booth ticket category, which corresponds to the TKTS category in the data. Below I explain the interpretation of this category. TKTS tickets were available for Seven Guitars in 197 of the 199 performances. The number of tickets made available at the TKTS booth varied from day to day, based on the number of unsold tickets up until the morning of the performance. In terms of price variation, note that booth tickets are sold at a 50% discount off the top full-price (plus a $2.50 service charge). Consequently, the same issues arise as with the price variation in the full-price ticket categories, described above. In summary, there are several kinds of price variation in the data that serve to identify the demand system. Some of this variation is helpful only in conjunction with functional form assumptions, which will be detailed in the next section. To what extent the particular functional form assumptions which are used can be motivated by economic considerations, will also be discussed at the next section.
Phillip Leslie∗
A common thread in the theory literature on price discrimination has been the ambiguous welfare effects for consumers and the rise in profit for firms, relative to uniform pricing. In this study I resolve the ambiguity for consumers and quantify the benefit for a firm. A model of price discrimination is described which includes both second-degree and third-degree price discrimination. The model is designed to analyze ticket sales for a Broadway play. Heterogeneous consumers choose between tickets for various seat qualities, tickets sold at a discount booth, and tickets requiring a coupon available to a subset of the potential consumers. Using data from a Broadway play, the structural …show more content…
In other words, there is some reason to view this source of price variation as being exogenous. To the extent that the time-series variation in the coupon price is not exogenous, the demand specification includes time-of-week dummies, a quadratic time trend and a dummy for after the Tony Awards which took place in the middle of Seven Guitars run. These variables should control for many of the obvious explanations of this price variation. The remaining variation in the coupon price over time may be an exogenous component. The second type of discount is the booth ticket category, which corresponds to the TKTS category in the data. Below I explain the interpretation of this category. TKTS tickets were available for Seven Guitars in 197 of the 199 performances. The number of tickets made available at the TKTS booth varied from day to day, based on the number of unsold tickets up until the morning of the performance. In terms of price variation, note that booth tickets are sold at a 50% discount off the top full-price (plus a $2.50 service charge). Consequently, the same issues arise as with the price variation in the full-price ticket categories, described above. In summary, there are several kinds of price variation in the data that serve to identify the demand system. Some of this variation is helpful only in conjunction with functional form assumptions, which will be detailed in the next section. To what extent the particular functional form assumptions which are used can be motivated by economic considerations, will also be discussed at the next section.