Pricing Theater Seats: The Value of Price Commitment and Monotone Discounting

We examine the value of price commitment for a nonprofit organization using individual level purchases over a series of concert performances. To decide on a pricing policy, the performing arts organization must be able to accurately measure when each ticket will be sold and what type of audience will purchase the tickets for each performance. We use a competing hazards framework to model the timing of ticket purchases when customers differ in their valuations and arrival times. We show that the customer purchase likelihoods change based on the prices observed earlier in the season, and demonstrate how price commitment aid in improving sales and revenues. We provide insights into the revenue-generating capability of commitment to a pricing policy that can address the differences among customer segments. In particular, we show that price commitment to a monotone discount policy can improve the average revenues as high as 6.72% per concert.