Monday, November 04, 2002
Posted 9:29 AM by Sean
The Yankees are raising ticket prices, and blaming the new labor deal. It's become increasingly in vogue among baseball writers to argue that using increased costs as an excuse for raising ticket prices is a sham. The argument goes like this: fans only care what they're spending for a ticket, not how much profit the team makes. Therefore, teams charge what people are willing to spend, which is completely independent from whatever it might cost the team to produce their product. To put it another way, teams would never lower their prices if their costs went down, so why should it work in reverse?
This is a pretty argument. It's also wrong. For starters, it assumes that baseball teams are completely rational economic actors, which, to make an understatement, they are not. Baseball teams' attitudes toward the law of supply and demand needs no better illustration than their ticket prices for various games. By and large, most teams charge the same price for a particular seat regardless of demand; seeing a mid-week game in Wrigley Field against the Padres is going to cost you the same as seeing a Saturday afternoon game against the Cardinals (assuming you sit in the same place, of course), despite the fact that the former won't be sold out and the latter will be. While some teams (including the Yankees) discount some tickets, so far they've made only baby steps toward pegging price to demand.
Secondly, regardless of what should be true in theory, cost is almost always included in pricing models anyway. When you run a red light and hit some little old lady in her Stutz Bearcat, your insurance rates go up because the insurance company suddenly has to pay on your account, and isn't making as much profit (and yes, I know that this argument can be turned around to say that what's really happening is your willingness to pay has increased, but in the case of insurance you HAVE to pay at all times because the law says so). When your wife tells you she's pregnant, you start thinking about asking for a raise, or finding a new job. Most baseball teams are owned by conglomerates of very rich men who have bought baseball teams not because it's a great monetary investment but because it adds to their prestige, but they DON'T want to be hemorrhaging money. The important thing to them is not making wheelbarrowsful of cash, but having a predictable bottom line. So when costs go up, ticket prices also go up.
All of which is not to say that the owners aren't weasels. They are. They're even weasels on this issue, because they manipulate costs like there's no tomorrow, such as paying themselves huge "consulting fees" so that they'll show losses. It's just that the true weaseling occurs at a deeper level than this "rising costs have nothing to do with rising ticket prices" stuff.