Economics blog

Olympic ticket prices released - a perfect example of price discrimination?

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The Olympic ticket prices for the 2012 Games have been released and to some criticism. Is this not just a monopoly market using price discrimination to maximise profits?

This is the official statement on ticket prices from London 2012 -

Tickets for the London 2012 Olympic Games are available at a wide range of prices starting at £20. There are also special prices for young people and seniors across all Olympic sports. Young people who are 16 years old or younger (at 27 July 2012) will pay their age for a ticket. Seniors aged 60 and over (at 27 July 2012) will pay £16. These ‘pay your age’ ticket prices and senior ticket prices are available in more than 200 sessions. The price of a ticket for a wheelchair space includes a companion seat located next to it.

This suggests that as London 2012 is the sole supplier of the Games it is in a position to act as the price maker, essentially tickets will be price inelastic. If an individual wants to see the Games in London then they have to buy a ticket from London 2012. However, in order to maximise profits London 2012 are price discriminating by setting different prices for different seats. This is because the market faces an downward sloping average revenue curve.

The London 2012 committee have said that ‘the 8.8m tickets for the 17-day event – 75 per cent of which will go on sale in March – have been priced so as to balance the number of cheaper tickets with higher prices at the top end of the market.’

However, London 2012 promised that 90% of tickets would be under £100, two thirds at £50 or less and 28% less than £20. Criticism is being laid at the door of the organising committee because it felt that these prices actually preclude many of the people who have been the most disrupted in the build-up to the Games.

Here are some questions you may like to pose to classes?

What would be the consequence if the price discrimination did not take place?
Can consumers benefit from price discrimination?
What factors need to be in place for a monopolist to be able to discriminate?
Is it fair to discriminate at the Olympics given the ethical and moral standards associated with the Games?

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