American Journal Of Business Education – First Quarter 2014 Volume 7, Number 1
Copyright by author(s); CC-BY 2 The Clute Institute
Phoenix. Surprise Stadium was built in 2002 on the former site of a World War II pilot training field and it cost
$48.3 million to build. The stadium is home to the Texas Rangers baseball team. Fifteen Major League Baseball
(MLB) teams play their spring training games in the “Cactus League.”
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The stadium was built to be family-friendly
and even boasts a free merry-go-round carousel for kids.
METHOD
Students were provided with a short instrument which required them to list a price for a pair of tickets to
two spring training baseball games involving the Texas Rangers. While the cost of the tickets was the same for both
games, in one case the game was against a team that typically draws a small crowd, the Kansas City Royals. In the
other case, the game was against a team that typically attracts a large crowd, the San Francisco Giants. Historically,
overall attendance at Cactus League spring training games for the San Francisco Giants at their spring training
facility in Arizona averages well over ten thousand fans, whereas attendance tends to be half that amount for the
Kansas City Royals.
The break-even cost of each ticket was $20. However, ticket market prices for sporting events are linked to
supply and demand. Teams that have a strong fan base tend to draw large crowds, which then impact prices on the
secondary ticket market. Baseball tickets tend to react like time-sensitive stock options.
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Sellers of perishable
goods, such as baseball tickets, have to sell their inventory within a fixed time horizon (Sweeting, 2012).
The instruments given to students involved pricing tickets for three baseball games. The first section
consisted of an illustration showing how to price tickets using a baseball game in which the Los Angeles Angels of
Anaheim played the Texas Rangers. The next two sections asked students to price their tickets for a Kansas City
Royals game and a San Francisco Giants game, respectively. Appendix A shows a copy of the instrument. What
was special about the instrument was that all the data was real data. None of it was made up.
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The seats for sale
listed on the instruments included only lower dugout seats. In examining Appendix A, observe that there were some
sellers asking just $15 for their tickets while other sellers were asking $35 for their seats to a Los Angeles Angels
spring training game.
The key variable that was manipulated on the instruments was the break-even cost data. On the
“treatment” instrument this data was clearly stated:
The tickets cost you $17 per ticket. After commission charges the “break-even” point is
$20. You make money at a price above $20 per ticket.
The break-even point is $20.
On the other “control” instrument, all of the above references to break-even points and the cost of the
tickets were deleted. The instrument shown in Appendix A is the “treatment” instrument. The expected hypotheses,
stated in the alternative form, were as follows:
H
1
: When tickets are selling at a discount, participants given break-even cost information will anchor on this
information and will price their tickets higher than those without this information.
H
2
: When tickets are selling at a premium, participants given break-even cost information will anchor on this
information and price their tickets lower than those without this information.
2
Spring training games for MLB teams are held in late February to early April in either Florida or Arizona. The “Cactus League” in Arizona
consists of the Arizona Diamondbacks, Chicago Cubs, Chicago White Sox, Cincinnati Reds, Cleveland Indians, Colorado Rockies, Kansas City
Royals, Los Angeles Angels of Anaheim, Los Angeles Dodgers, Milwaukee Brewers, Oakland Athletics, San Diego Padres, San Francisco
Giants, Seattle Mariners and the Texas Rangers. The “Grapefruit League” in Florida consists of the Atlanta Braves, Baltimore Orioles, Boston
Red Sox, Detroit Tigers, Houston Astros, Miami Marlins, Minnesota Twins, New York Mets, New York Yankees, Philadelphia Phillies,
Pittsburgh Pirates, St. Louis Cardinals, Tampa Bay Rays, Toronto Blue Jays and the Washington Nationals.
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Happel & Jennings (2002) describe the secondary ticket market as having characteristics similar to call options. They claim that the printed
value on a ticket is similar to placing a par value on common stock and that it is simply a starting point that provides a legal measure of what is
“fair” or “equitable.” Like a call option, the holder of a ticket has the right, but not the obligation, to occupy (or call in) a certain seat over a
certain period of time.
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It may be interesting to note that the tickets for sale, as described in the instrument in Appendix A (row D, section 105), were the author’s
personal spring training tickets. Students, however, were not informed of this fact.