College Basketball Ticket Auctions

So, seems it’s auction week here. Monday saw the application of auction theory and a new kind of geometry to central banking. Today we look at an extension of the classic Dutch auction (an auction where the seller sets a high asking price, then lowers the price until a buyer is willing to accept) to pricing for Northwestern University college basketball tickets. Jeff and Sandeep:

We are using a system which could roughly be described as a uniform price multi-unit Dutch Auction. In simpler terms we are setting an initial price and allowing prices to gradually fall until either the game sells out or we hit our target price. Thus we are implementing a form of dynamic pricing but unlike most systems used by other venues our prices are determined by demand not by some mysterious algorithm.

But here is the key feature of our pricing system:  as prices fall, you are guaranteed to pay the lowest price you could have got by delaying your purchase. That is, regardless of what price is listed at the time you reserve your seat, the price you will actually pay is the final price.

What that means is that fans have no reason to wait around and watch the price changes and try to time their purchases to get the best possible deal. We take care of that for you.

It also removes another common gripe with dynamic pricing, different people paying different prices for the same seats. Our system is fair: since everyone pays the lowest price, everyone will be paying the same price.

Here is a link with more on “Purple Pricing,” which includes a video starring Jeff and Sandeep themselves discussing the market.

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