Angela booked a band for tonight. She decided to use yield management pricing and set three ticket prices: $17.50, $15.00, and $12.50. Fans bought 3,000 seats in each section. What was the revenue for the event?
- ticket prices $17.50, $15.00, and $12.50.
- Fans bought 3,000 seats in each section
This means that 3,000 seats were bought from each price assuming that each price represents a section. Thus, there are 3 sections for a total of 9,000 seats sold.
- 17.50 x 3000 = 52,500
- 15.00 x 3000 = 45,000
- 12.50 x 3000 = 37,500
- total 135,000
The revenue for the event is $135,000.
Yield management pricing is defined as the “variable pricing strategy, based on understanding, anticipating and influencing consumer behavior in order to maximize revenue or profits from a fixed, time-limited resource”
The revenue we computed is the best possible maximum revenue that the event can garner that satisfies both supplier and buyer. Had Angela maintained a single price, only a section nearest to the stage will be filled because people will not find it worthy to buy a ticket that will not let them see the band up close. This will lead to a lesser revenue.