When a Band Is Like an Airline

On your recent flight, you might have paid more (or less) for a ticket than the person sitting next to you. The same could have been true for the next Oasis concert. Then though, after 450 complaints, the Irish Parliament started to investigate.

Our story starts with the sale of tickets to the Oasis 2025 reunion tour. After becoming available on August 31, the tickets stirred up a huge protest when prices surged during the queue. As a result, a fan could have expected to pay €176 (£148, $194.81). Then though, after waiting for several hours, some were told the new price was €400 (£337, $443.59).

It’s called dynamic pricing. The firms that use dynamic pricing change the price of the item they sell during an hour, a day, or a month. Monitoring supply and demand, they select new prices.

Dynamic Pricing

History

In London, during the early 19th century, store clerks that knew what was high, what was low, and what would generate a profit were prepared to haggle. Time consuming, the process meant every customer could have a different price.

But then we had the invention of the 19th century department store. Think New York’s Macy’s. It would have been impossible and impractical to train hundreds of employees to negotiate a price for thousands of items. The result? The price tag.

With single prices, customer service could blossom as would customer loyalty. We could also have price wars, money-back guarantees, loss leaders, and promotional pricing, Auto dealers tell us that fixed prices for cars cut buying time by 82 percent from more than four hours to 45 minutes. The same change transformed the retail experience so compellingly that by 1890, one price for each item had become the norm.

Now though, sort of back to where we started, we again have different prices for the same item…even Oasis tickets.

Wendy’s

During its investor conference call several weeks ago, Wendy’s CEO told us that its digital menu boards will have different prices during the day.

The uproar followed.

Assuming that Wendy’s was following Uber’s surge model, the media thought Wendy’s CEO meant that when demand went up, so too would prices. The company quickly responded that its dynamic pricing was a discounting model used to lower prices.

Amazon

Amazon reputedly changes its prices more than two million times a day. This graphic shows its response to Best Buy:

Airlines

Perhaps though, it’s the airline industry with which we most associate dynamic pricing. There, it all began in 1978 with deregulation. At the time, one Delta executive became horrified that his reservations staff had lowered fares for the Atlanta/Washington D.C. route as the departure date approached.

I suspect I would have lowered those fares also. If you have empty seats, it makes sense to attract more fliers by lowering the price.

The right approach though was precisely the opposite. Knowing that last minute fliers are willing to pay much more, the airline should have been increasing fares. Quickly moving to a dynamic pricing model from one controlled by government, the airlines decided fliers on the same plane could pay different fares. It all depended on whether the flier was discretionary or business, if the flight was departing in days or months, and how many seats remained.

Our Bottom Line: Oasis Ticket Prices

Online, we have Oasis raising and lowering prices.

In traditional economic texts, we say that pricing power increases as we move to the right along a competitive market structures continuum. Moving from perfect competition to monopolistic competition, to oligopoly and monopoly, we have increasingly powerful firms. Theoretically, the ones that are more powerful have more control over what they charge instead of the market.

Competitive Market Structures Continuum

Knowing that legislators in Ireland are planning to prevent Oasis from variable pricing, today, we wind up with a question. The price rises because of the market. A process through which price and quantity are determined, the market creates incentives. Responding, Oasis scheduled extra concerts. Instead, legislative price caps can diminish the quantity supplied…but make existing tickets more affordable.

Your opinion?

My sources and more: If you are like me, this Oasis history  will come in handy. Then, I could better understand their popularity and the ticket demand that was described by The Guardian and NPR.

Several sections from today were in a past econlife post. I was concerned that the YouTube diagram was from 2012 (I’ve used it in the past) but other sources confirm Amazon still uses dynamic pricing.