It's an interesting question, and it just so happens that I was planning to write on something directly related to this topic this week. Seth, if you're out there, I'm giving you a two-for-one deal: Two complementary economics answers for the price of one. First, here's Jodi's main point (she has a lot of side points, too... really, check them out here):
I had a topic for you to address that I thought might be good for someone with a behavioral econ background. Tonight is Stephen Strasburg’s MLB debut (#1 uber prospect) for the Nationals. The Nationals will only let you buy tickets for tonight if you buy tickets to 3 other games during the season. You do get one of those games free, plus a Nats hat. Why don’t the Nats just raise their prices for tonight’s game? My guess is that people hate price increases, but I thought I would see if you have some research to back that up or other ideas?
Luckily, that explanation is simple- that kid is cool, and people really want to see him. Regardless of whether markets are competitive or not, increased demand leads to higher prices. But Seth points out that the Nationals are being a bit sneaky- they aren’t explicitly raising the ticket prices for the popular game, but they are bundling it with other items. I can’t be sure of what their reasoning is, but my hypothesis is something along the lines of the following: like I said, the marginal cost of one more person at the ballpark is essentially zero since there are a fixed number of seats. (The opportunity cost of the bundled tickets is also zero since the tickets would likely go unsold otherwise.) In addition, once a person is at the ballpark there is a chance that he will buy the $8 draft beers, the $6 cheeseburgers or, if you’re in Boston at least, the $4 Dunkin Donuts iced coffee. These two facts together imply that there is an incentive to get butts in the seats, in which case the bundling strategy is clearly superior to just raising prices.Basically, Jodi points out that the Nationals were blessed with high demand, so they did what our supply and demand models predict; they raised prices. But, they did so in a smart way. They bundled the high value product with a different product they were having difficulty selling. As Jodi points out, this is a smart idea because it achieves cost savings, filling seats that would otherwise go unfilled.
Bundling is smart for another reason that Jodi didn't mention in her post. Bundling can effectively enable price discrimination (or charging different prices for the same good). The obvious good here is a ticket to watch the phenom, but let's focus on the auxiliary tickets to see more clearly how the Nationals are selling at different prices in this example. Effectively, the Nats can exploit the excess demand for "phenom watching" by using a bundle to charge more than they would have gotten for the ordinary tickets.* If the "phenom watchers" attend the three ordinary games, they will likely sit next to someone who paid half the price for a ticket that they bought in the parking lot before the game. (UPDATE: This is backwards for the price discrimination story. All else equal, the high-phenom demand individuals will feel like they paid a low price for the ordinary tickets. See my correction in the comments.)
An additional consequence of bundling the tickets this way is that the bundle acts as a screening device. Some fly-by-night fans might want to go see the phenom's major league debut, just because it is his major league debut (some people like the spectacle). All else being equal, these fans will tend to have less overall demand than those fans who just love their Nationals. In this sense, the four-ticket bundle will be more attractive to "genuine" fans than it will be to spectacle spectators.**
In case you want to know more about price discrimination, I recently recorded three videos on the topic. Formally, the Nationals are engaging in 2nd degree price discrimination (which is -- appropriately -- the second video in my series). Unlike 1st and 3rd degree price discrimination, the formal theory of 2nd degree PD is a bit hard, but the intuition is just what I've said: use bundles to charge different prices for the same good.
Here are the videos:
If you like these videos, I have 45 more videos on microeconomics at my YouTube channel, which follow (so far) the first six chapters of my book. Check it out if you're interested.
*To be fair, Jodi touched on the price discrimination logic in the story. She just didn't emphasize it. With me being a lover of price discrimination, I felt compelled to write a post emphasizing this feature.
** The team could have different reasons for wanting to screen the audience for genuine fans. Maybe they cheer harder or spend more money at the concession stands.