Liverpool Football Club is in the midst of a backlash among fans against planned increases in ticket prices. As an economist, I’ve seen similar arguments in other markets. I’d like to offer a bit of insight into what might happen if ticket prices fell rather than rose.
Right now, clubs in the Premier League have no trouble selling most of their tickets. If ticket prices were to fall, then everyone who currently buys a ticket would probably still want one. In addition, some people who currently don’t choose to purchase tickets might decide to buy. So the demand for tickets would rise.
At clubs that regularly come close to selling out their stadiums, this would cause a shortage. More people would want to buy tickets than there were tickets available. The question would become how to allocate the tickets among buyers.
Since demand already outweighs supply at many clubs, it’s not hard to see what would happen. First-come, first-served is a non-starter for loyal fans. Many of them make a sort of historical claim based on their past allegiance to the club. If prices were to drop, they would be first in line to buy tickets at the lower prices, and they might even buy more tickets than before. Some may even want their children to be able to inherit their claims on tickets. An exclusive elite of hereditary ticket-holders would soon emerge.
This creates two potentially contentious issues. First, new fans of the club may never be able to see Liverpool play in person. Second, and of more interest to an economist, a problem of allocative efficiency may arise.
From the viewpoint of social welfare, an allocation of a good or service with a fixed price is efficient when the people who receive it are the ones who value it the most. Yet the hereditary elite may not all fit into this category. All of them would be willing to pay the lower prices to see a match, but some other people might be willing to pay much more, even if they had the same wealth. These unlucky superfans would be shut out of the stadium.
A lottery for tickets would have the same problem. There would be no guarantee that the people who valued the tickets the most would be the ones picked to purchase them. (It would, however, be more egalitarian.) Only an auction would allocate the tickets efficiently, but not an auction based on money. Rather, the auction would have to be in terms of things people valued somewhat equally regardless of their wealth, such as time. Putting aside some tickets to be auctioned in terms of hours of work pledged to Liverpool charities might be a useful innovation.
The other thing that would happen with lower ticket prices is, of course, a fall in revenue for the club. Liverpool would be at a relative disadvantage in the market for players, coaches, and other staff.
Now, proponents of lower prices might argue that all clubs in the Premier League should offer cheaper seats, thus creating a level playing field. But as the most recent transfer window has shown, Liverpool competes for players not just with the rest of the league but with clubs around the world. Would clubs everywhere impose the same limits on ticket prices? Even among the teams Liverpool might face in European competition, it seems unlikely. Nor is it easy to pay players less. They, too, can negotiate with many possible employers, and the ones Liverpool wants to buy tend to have a lot of bargaining power.
A common response to this argument is to say that owners should simply take smaller profits to offset the drop in revenue. In essence, this is a request to turn the club into a nonprofit or a public trust. Indeed, many big clubs around the world already have this model in place. The simple way to institute it at Liverpool would be for a supporters’ group to buy the club from Fenway Sports Group and convert it into England’s answer to FC Barcelona. But in the meantime, it seems improbable that John W. Henry, a self-made financier and businessman, would adopt such a model out of charity to the club’s hereditary elite.