Pricing under uncertainty: Forward and Option Pricing in Sports Markets
Abstract
Sports generate massive revenues. Despite COVID-19, total 2022 National Football League (NFL) revenue in the United States was $18 billion (Moore, 2022), and 2021 Premier League revenue in Europe was €6.1 billion.1 The global sports market is expected to grow from US$355 billion in 2021 to $501 billion in 2022, and to an eye-watering $708 billion in 2026.2
Most sports markets feature one or more elimination tournaments. Currently, tournament game tickets are sold in advance, before the teams playing in the final games are known (we refer to this strategy as “advance” pricing). As it can be very competitive to purchase tickets to the final games, fans often purchase tickets before they know if their preferred team is going to play. Fans who purchase tickets in advance may face the prospect of attending a game they are not interested in—or reselling tickets in the gray and noisy secondary market.
Against this backdrop, we analyze two alternative pricing mechanisms for high-uncertainty environments—consumer forwards and consumer options.
- Keyword(s):
- marketing 140
https://kenaninstitute.unc.edu/publication/pricing-under-uncertainty-forward-and-option-pricing-in-sports-markets/
