Dynamic ticket pricing and sabermetrician salaries

Over at Sabernomics, J.C. Bradbury defends "dynamic pricing," which basically means teams charging different prices for different games. It might cost a bit more to see the Yankees, or to see a weekend game, or (especially) to see the Yankees on the weekend. Conversely, a night game against the Royals on a cool night in April might be cheaper.

He's absolutely right that this is a good idea. A Yankees game and a Royals game are different products, so why should the price be the same? It's like if the Beatles play Shea Stadium, and charge $100 a ticket ... the next night, Bobby Vinton plays, and tickets are only $25. You get the same seat, in the same venue, listening to the same sound system, and let's even say it's the same stage. But, obviously, there's a reason the Beatles cost more.

I don't see that there's any issue at all. I think that Tango gets it right, when he says some of the complaints are due to the way the explanation is framed. The media are describing the situation as if Yankee games cost extra. The extra cost bothers people -- they think they're being ripped off. But, instead, if teams presented Yankee games as regular price, and Royals games as *discounted*, I think Tango is right that there would be a lot less resistance.

And, in any case, high prices for some games can be a good thing for fans overall. There are only a certain number of seats in the ballpark. What works out best is if those seats go to the fans who value them the highest. If ticket prices were absurdly low, say, five cents, you can imagine how difficult it would be to get a seat. There would be millions of people vying for those 40,000 seats, and entering a lottery for $4 season tickets. A lot of those tickets would go unused -- I can tell you for sure that if I won the lottery, I might only go to four or five games, and the other tickets would be wasted. Sure, I could give them away, but they might go to people who are as unenthusiastic about seeing the games as I am.

Have you ever gone to a store to get a particular item that you needed badly, but when you get there, you find out it's on sale this week, and as a result, the store is sold out? It's happened to me, and it drives me nuts. I really need a pound of ground beef, because I'm having friends over and making burgers. But the ground beef is on sale for $3, and so there isn't any left! But I was ready and willing to pay the $6 regular price, and so I'm frustrated.

Or ... imagine that you've waited all your life to see the Cubs make it to the World Series. Finally, it happens. You're ready to pay $1000 for a seat, because it's a once-in-a-lifetime experience, and maybe you're even one of the top 10 Cubs fans in the world. There is nothing you want more than to see that game. Alas, the Cubs, fearing bad press, sold that seat for $50, and some guy bought up your seat who doesn't even like baseball much, just to impress his friends that he was there.

That sucks. But thank God for the Coase Theorem, which says that when someone gets a seat for $50, but doesn't want to see the game that badly, he'll sell the ticket to you for something closer to $1000. But why should anyone complain about paying a higher price to the Cubs, instead of to the scalper? What good does the middleman do? And, at least if the Cubs are the ones make more money off the $1,000 ticket sales, they have an incentive to build a better team in the future.

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Anyway, an interesting thing about all this is that a couple of days before Bradbury's post, the Cleveland Indians advertised a couple of jobs, one of which is for a "baseball analyst." That appears to be a combination programmer/statistician/sabermetrician job.

Over at Tango's blog, there's a lot of interest in the position, as you might expect. Eventually, the discussion turned to pay, and the consensus seems to be that there is a "baseball discount" when working for the front office of a baseball club. That is, posters expect the Indians pay significantly less than what a similar job would pay elsewhere. A couple of commenters suggested that it might pay as little as half the market salary for similar positions outside of baseball. (The Indians' posting doesn't mention salary, so this is all speculation.)

Which, at first, sounds like a ripoff. Why should the Indians be able to underpay productive staff, just because of the glamour of working in baseball? But, just as Tango points out for the dynamic pricing of tickets, it makes more sense if you look at it the other way. It's not that the Indians are paying less because the job is so good -- it's that other places are paying *more* because they don't offer what the Indians do!

If the Indians do pay less, then whoever winds up with the job will actually have no complaint: if the Indians had offered more, that person probably would have had a lower chance of getting the job, because there would have been more qualified candidates applying. And, just as in the ticket situation, wealth (or happiness, or utility) is created this way.

Suppose Joe and Bob are exactly equally qualified and doing exactly the same work. If Joe has the Indians job at $40,000 a year, and Bob has a job at a fertilizer factory at $70,000 a year, and neither would swap with the other, then neither has any cause for complaint. Bob could say, "well, if the Indians had paid a fairer wage -- say, $50,000 -- I'd go work for them." But all that shows you is that Joe values the Indians' environment at $30,000 a year, while Bob values it at only $20,000. Just as it's better to put the Cubs tickes in the hands of whoever wants it the most, then, productivity being equal, it's better to put the Indians' job in the hands of the applicant who appreciates it the most.