Answer to Question #49586 in Macroeconomics for Obinna

Question

Suppose the Phillies decide to charge 25 percent more per ticket for every home game against the New York Mets (who always attract a lot of fans from New York). Assume initially that the cost of “providing” a game against the Mets is no different than for any other team.

a. Is this price discrimination? If so, what form of price discrimination is it, and why is it that form of discrimination. If it not, why isn’t it price discrimination?
b. Suppose Mets fans are particularly rowdy, so the Phillies have to hire extra security for a Mets game. Assuming that the Phillies must pay $250,000 in extra security costs regardless of attendance, does your answer to (a) change? Why or why not?
c. Suppose the security costs rise by $10 for every fan admitted to a Mets game but by only $5 for every fan admitted to any other game. Does your answer to (a) change? Why or why not?

Answer 1

a. It is not an example of price discrimination, because price is not different for different fans, because tickets for all fans become more expensive.
b. If Mets fans are particularly rowdy and the Phillies have to hire extra security for a Mets game, and if the Phillies must pay $250,000 in extra security costs regardless of attendance, the answer to (a) will not change, because there is no differentiation in price.
c. Suppose the security costs rise by $10 for every fan admitted to a Mets game but by only $5 for every fan admitted to any other game. The answer to (a) will not change again, because all fans will pay more for such games because of higher costs.