Purple Pricing

It shouldn't be surprising, perhaps, that one of the more innovative sports ticket pricing schemes to be put into practice comes out of Northwestern University, not traditionally a sports powerhouse. Last month, they launched Purple Pricing for select men's basketball games for the rest of this season.

Essentially, Purple Pricing is a form of Dutch Auction, in which the prices of the item being sold are lowered until you hit the price at which all the items can be sold at that price. Then everyone who has bid above that price pays the lower price, the same as everyone else. The incentive, in the case of Northwestern men's basketball tickets, is to find that price at which they can sell out the game and also to capture some revenue back from the secondary market, from companies like Stubhub.

For the buyer, as soon as the price reaches one you're willing to pay, there's not reason to wait. The price can only go lower from there, it will never rise.

Purple Pricing is a joint effort between the Northwestern athletic department and economists Jeff Ely and Sandeep Baliga. The experiment will provide Northwestern with a ton of data to maximize revenue.

Theirs is not a perfect Dutch Auction, however, as there is an artificial price floor. Northwestern will not let the Dutch Auction prices fall below the price that season ticket holders paid. In the future, they could do away with season tickets altogether and use Dutch Auctions to price every game.

The first two games Northwestern tried this with offered a good divergence in demand to test out the system: a desirable game against #16 ranked Ohio State, and a much less desirable game against Penn State. The attendance against Ohio State was 7,036, while against Penn State it was just 5,517. It would have been interesting to see where the price would have landed for the Penn State game had there been no price floor in effect.

Alas, Northwestern lost both games. Some problems can't be so easily solved with economics.