EVANSTON, Ill. (CBS) – Northwestern University basketball will try out “Purple Pricing,” designed by economics professor Jeffrey Ely to increase revenue and fairness, and also decrease the number of empty seats at low-interest games.
Ely said, under “Purple Pricing,” the price of seats will start high and keep dropping until all the tickets are sold; those who bought tickets early will be refunded the difference between their price and the low price.
He said the experiment should increase revenue to Northwestern, and make sure as many seats as possible are sold. It also avoids the problem of some fans being angered by sitting next to people who might have paid much less for a seat in the same section.
“You’re not going to be looking at your neighbor and wondering ‘Did he get a better deal than me?’ because everybody’s going to be paying the same price,” Ely said.
Ely said the approach is really what’s called a Dutch Auction – originally used to sell tulips at flower markets in the Netherlands.
He said current approach of guessing demand for each game before setting prices isn’t the best way to go – sell at too high a price, and the game won’t sell out; sell at too low a price, and the school leaves money on the table.
“You’re either going to have a quick sellout, and a lot of people left out in the cold, or you’re going to have a price that’s too high, and you’re going to have empty seats,” he said.
Ely said the Northwestern University Athletic Department agreed to try out “Purple Pricing” at two upcoming games: against Ohio State, a high demand game, on Feb. 28; and against Penn State, a low-demand game, on March 7.
Ely said “Purple Pricing” should increase revenue to Northwestern, but he was not willing to speculate how much.