Introduction Game Day at Super Bowl XXXV and at least 1000 fans are holding tickets wanted signs in front of the stadium Ticket holders report offers of $5000 for tickets with face values of either $325 or $400. Source: Krueger, Alan, Supply and Demand An Economist Goes to the Super Bowl, The Milken Institute Review, Second Quarter 2001, pp. 23-29.
Topics for Discussion n With a fixed number of seats in the stadium, what are possible methods of allocating tickets among fans? What are the arguments for and against each method? n What explains the behavior of the NFL? Of ticket holders? n What is a fair and reasonable price for a ticket to the Super Bowl?
To economists, scalping is a benign activity that creates value. Explain.
Interesting Ideas n Has the law of one price been repealed? n Salants implict long term contract model n Beckers restaurant pricing model (status good?) n Thalers endowment effect. n Gift exchange motive
Basic Concepts n In market equilibrium, price is such that quantity supplied equals to quantity demanded. n Market tends to allocate a good toward its highest private value user. n Market outcomes may not always seem fair.