Consumer options: Theory and an empirical application to a sports market

Preethika Sainam, Sridhar Balasubramanian, Barry L. Bayus

Research output: Contribution to journalArticle

19 Citations (Scopus)

Abstract

The authors introduce the concept of consumer options and empirically validate it in the context of event ticket pricing. They demonstrate that consumer options can protect consumers from the downside related to uncertain outcomes and enhance seller profits by enabling superior market segmentation and increasing consumer willingness to pay. The authors examine the newly proposed ticket pricing mechanism in sports markets, in which there is uncertainty about the teams that will play in a final event (e.g., the National Collegiate Athletic Association Final Four basketball tournament). Fans who want to attend the game after knowing which teams will play are often disappointed because tickets typically sell out in advance. The authors propose that a fan can buy an option on a ticket before this uncertainty is resolved. Later, he or she can decide whether to exercise the option. The authors present a simple analytical model of consumer options in this setting. Then, they empirically demonstrate that profits under option pricing can exceed those from (1) advance selling and (2) pricing after uncertainty is resolved. The analysis and findings of this article lay a foundation for future work on consumer options in marketing.

Original languageEnglish (US)
Pages (from-to)401-414
Number of pages14
JournalJournal of Marketing Research
Volume47
Issue number3
DOIs
StatePublished - Jun 2010
Externally publishedYes

Fingerprint

Option theory
Uncertainty
Profit
Pricing
Tournament
Analytical model
Exercise
Pricing mechanism
Market segmentation
Advance selling
Option pricing
Marketing
Willingness-to-pay
Seller
Athletics
Basketball

Keywords

  • Advance selling
  • Consumer options
  • Event tickets
  • Option pricing
  • Pricing under uncertainty

ASJC Scopus subject areas

  • Business and International Management
  • Economics and Econometrics
  • Marketing

Cite this

Consumer options : Theory and an empirical application to a sports market. / Sainam, Preethika; Balasubramanian, Sridhar; Bayus, Barry L.

In: Journal of Marketing Research, Vol. 47, No. 3, 06.2010, p. 401-414.

Research output: Contribution to journalArticle

Sainam, Preethika ; Balasubramanian, Sridhar ; Bayus, Barry L. / Consumer options : Theory and an empirical application to a sports market. In: Journal of Marketing Research. 2010 ; Vol. 47, No. 3. pp. 401-414.
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