Last February, Northwestern laid out its plan for Purple Pricing, a Dutch Auction in which the price will always fall. Now, that model is headed to football. Tickets will go on sale through Purple Pricing for the Ohio State and Michigan games starting Thursday at 10 a.m. CT. Prices will start high and will fall as the demand shows fit.
The model was originally set up in February by Jeff Ely, an NU economics professor, and Sandeep Baliga, an economist at the Kellogg School, and NU used it for two basketball games. Here's the description of how it worked:
Dynamic pricing models are already popular in professional sports, and they help to maximize profits for sports teams, and even other industries like airlines. However, in dynamic pricing, prices can fluctuate up and down. For baseball games, prices fluctuate based on pitching matchups, while airline ticket prices can also rise and fall depending on when tickets are bought. That gives the buyer an incentive to risk waiting to see if prices fall.
Purple Pricing is unique in that prices will only fall with demand, so customers can either buy tickets at the original price if they’re comfortable with it, or wait until prices fall to a price they’re willing to pay. This way, there is no incentive to wait.
“When you know the price will only go down and any price reduction will be refunded to you, it means that the decision to purchase a ticket is extremely simple for you,” Ely said. “You look at the current price, you know it might not be the final price, but you just ask yourself, ‘Am I willing to pay that price?’ And if the answer is yes, then you should buy right now and then reap the benefits of any price decreases that might come later on.
“So the main innovation in this pricing system is to remove that strategic consideration out of the buyer’s mind.”
But this time around, Purple Pricing will be a little bit different and better resemble a real Dutch Auction. Due to the sheer volume of tickets football sells compared to basketball, NU needed a different system to run the auction, so it set up NUPurplePricing.com, which is better fit to handle the auction than the software that was used in February.
"(The site is) designed to interface with the Northwestern software as a backend and allows us to easily adjust prices, keep track of sales and inventory data and facilitate our new bidding feature," Ely said.
That bidding feature is the second addition to the system. While every fan will pay the lowest price, the bidding feature allows fans to "bid" the highest price they're willing to pay. If the price of the tickets falls to that price, they will get the tickets (and a refund for however much further the price falls), but if the price doesn't fall that far, they won't get the tickets.
"We are excited to see how people use the system," Ely said. "We had requests to implement bidding last time, so we think its going to be a great addition to the auction."
For more information, see our piece from February, NUPurplePricing.com, and Crain's Chicago Business