Pricing under uncertainty: Forward and option pricing in sports markets
Tickets to popular elimination style tournaments (e.g., NFL Super Bowl) are expensive and scarce. Sports organizations sell these tickets well in advance of the final game. Fans hesitate to buy them because they are unsure about whether their favorite team will play in it. We present two alternative...
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Institutional Knowledge at Singapore Management University
2022
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sg-smu-ink.lkcsb_research-80302023-08-30T06:28:04Z Pricing under uncertainty: Forward and option pricing in sports markets SAINAM, Preethika BALASUBRAMANIAN, Sridhar BHATTACHARYA, Shantanu ONG, Lin L. Tickets to popular elimination style tournaments (e.g., NFL Super Bowl) are expensive and scarce. Sports organizations sell these tickets well in advance of the final game. Fans hesitate to buy them because they are unsure about whether their favorite team will play in it. We present two alternatives to the current practice: consumer forwards and options. A fan pays a reserve price to secure her team-specific forward ticket. If that team makes it to the final game, the fan must (in the option case, has the choice to) pay an exercise price to purchase the ticket. If the team does not make it, the forward expires (the option does not). We demonstrate how such alternatives buffer consumers from uncertainty and enhance profits under uncertainty. In a market with heterogeneous fan types, we demarcate conditions under which these alternative pricing mechanisms yield higher profits than advance pricing, including under capacity constraints. 2022-03-01T08:00:00Z text application/pdf https://ink.library.smu.edu.sg/lkcsb_research/7031 info:doi/10.2139/ssrn.4063637 https://ink.library.smu.edu.sg/context/lkcsb_research/article/8030/viewcontent/SSRN_id4063637.pdf http://creativecommons.org/licenses/by-nc-nd/4.0/ Research Collection Lee Kong Chian School Of Business eng Institutional Knowledge at Singapore Management University Forward Pricing Option Pricing Advance Pricing Market Uncertainty Consumer Heterogeneity Capacity Constraints Business Administration, Management, and Operations Operations and Supply Chain Management |
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Forward Pricing Option Pricing Advance Pricing Market Uncertainty Consumer Heterogeneity Capacity Constraints Business Administration, Management, and Operations Operations and Supply Chain Management |
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Forward Pricing Option Pricing Advance Pricing Market Uncertainty Consumer Heterogeneity Capacity Constraints Business Administration, Management, and Operations Operations and Supply Chain Management SAINAM, Preethika BALASUBRAMANIAN, Sridhar BHATTACHARYA, Shantanu ONG, Lin L. Pricing under uncertainty: Forward and option pricing in sports markets |
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Tickets to popular elimination style tournaments (e.g., NFL Super Bowl) are expensive and scarce. Sports organizations sell these tickets well in advance of the final game. Fans hesitate to buy them because they are unsure about whether their favorite team will play in it. We present two alternatives to the current practice: consumer forwards and options. A fan pays a reserve price to secure her team-specific forward ticket. If that team makes it to the final game, the fan must (in the option case, has the choice to) pay an exercise price to purchase the ticket. If the team does not make it, the forward expires (the option does not). We demonstrate how such alternatives buffer consumers from uncertainty and enhance profits under uncertainty. In a market with heterogeneous fan types, we demarcate conditions under which these alternative pricing mechanisms yield higher profits than advance pricing, including under capacity constraints. |
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text |
author |
SAINAM, Preethika BALASUBRAMANIAN, Sridhar BHATTACHARYA, Shantanu ONG, Lin L. |
author_facet |
SAINAM, Preethika BALASUBRAMANIAN, Sridhar BHATTACHARYA, Shantanu ONG, Lin L. |
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SAINAM, Preethika |
title |
Pricing under uncertainty: Forward and option pricing in sports markets |
title_short |
Pricing under uncertainty: Forward and option pricing in sports markets |
title_full |
Pricing under uncertainty: Forward and option pricing in sports markets |
title_fullStr |
Pricing under uncertainty: Forward and option pricing in sports markets |
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Pricing under uncertainty: Forward and option pricing in sports markets |
title_sort |
pricing under uncertainty: forward and option pricing in sports markets |
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Institutional Knowledge at Singapore Management University |
publishDate |
2022 |
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https://ink.library.smu.edu.sg/lkcsb_research/7031 https://ink.library.smu.edu.sg/context/lkcsb_research/article/8030/viewcontent/SSRN_id4063637.pdf |
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