Secondary Market Behavior during College Football's Postseason: Evidence from the 2014 Rose Bowl and BCS Championship Game

By Rishe, Patrick; Reese, Jason et al. | International Journal of Sport Finance, November 2015 | Go to article overview

Secondary Market Behavior during College Football's Postseason: Evidence from the 2014 Rose Bowl and BCS Championship Game


Rishe, Patrick, Reese, Jason, Boyle, Brett, International Journal of Sport Finance


Introduction

There is considerable literature regarding the primary sports pricing market (Fort, 2004; Coates & Humphreys, 2007; Krautmann & Berri, 2007) that argues that ticketing professionals engage in inelastic ticket pricing, and that such behavior is not counter to a profit-maximizing objective because it enables organizations to optimize other non-ticket sources of revenue. Additionally, there is long-standing evidence from the marketing literature (Scitovsky, 1945; Monroe & Krishnan, 1985; Tsao, Pitt, & Caruana, 2005) of a strong correlation between the price of a product and perceptions of product quality. Therefore, investigating secondary price trends in unexamined sports industry niches affords an opportunity to (1) confirm whether these niches also engage in inelastic ticket pricing, and (2) explore how perceptions of quality (among other factors) contribute to secondary markup differentials across tickets sold.

Academic research regarding the secondary ticket market has become more voluminous in recent years but is still relatively underdeveloped. This is particularly the case as it pertains to collegiate sporting events where there has been tremendous growth in secondary market revenues. Shapiro and Drayer (2012) suggest this secondary ticket market growth has led to it becoming a multibillion-dollar industry. For example, the estimated dollar volume of total secondary market sales increased from $2.6 billion in 2011 to $4.0 billion in 2013, with increases from $420 million to $676 million over the same span for college sports alone. Approximately 75% of this volume comes from the resale of college football tickets.1 Rishe (2014a) and Rishe et al. (2014b) examined secondary price trends in college basketball's March Madness, but there are no analogous studies of secondary pricing in college football.

The current study focuses on the secondary market for two specific college football bowl games (the 2014 Vizio Rose Bowl between Michigan State and Stanford, and the 2014 BCS National Championship between Auburn and Florida State). Though both games were contested at the Rose Bowl in Pasadena, CA, within six days of each other during the first week of 2014, there was considerable heterogeneity across these games that could potentially impact secondary market behavior. For example, the 2014 Rose Bowl featured one team (Michigan State) that had not participated in the Rose Bowl since 1988, and another team (Stanford) located approximately 360 miles from Pasadena (site of the game). Conversely, the BCS title game marked the first time in the 16-year history of the BCS where the competing teams (Auburn and Florida State) each traveled more than 2,000 miles to reach the host city of the event. In short, the analysis herein allows an examination of whether these factors, as well as proxies for seat quality, significantly affect secondary market behavior for college bowl games.

In terms of theoretical contributions, this paper extends the pricing literature by examining pricing behavior within the unique consumer product class of sports entertainment. Other key contributions include (1) the first detailed examination of secondary price behavior at major college football bowl games (events with a growing need to understand consumer's purchase behavior), (2) the first attempt to explore whether secondary price behavior differs across different ticket reselling firms (ticket brokers that sport properties continue to contemplate sponsorship with and therefore need a better understanding of Drayer, Shapiro, and Lee [2012]), (3) confirmation that pricing for these particular bowl games is consistent with inelastic sports ticket pricing found throughout the sports pricing literature (the first exploratory attempt at examining this in bowl games), (4) fan proximity and frequency of participation can exert influence upon secondary price markups (an extension of the Alchian-Allen theory, showing the impact of distance on price and spending), and (5) seat quality (namely, seat centrality and closeness to the field) significantly affects the degree of secondary price markups (advancing the discussion of event quality and price tier theory in Reese and Kerr [2013]). …

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