When playoff season approaches, sports fans who love the game itself can buy playoff tickets assured that they’ll get what they paid for — a great match. Fans who only want tickets if their favorite team makes it to the final have a more difficult decision to make: if they wait to see if their team makes the cut, they risk missing out on playoff tickets — which are often sold months in advance or snatched up very quickly. If they buy early, they may be stuck with a ticket for a playoff game that they are not interested in attending. What’s a loyal fan to do?
One answer may be to buy options. If a college football team is a Rose Bowl contender, for example, fans can buy an option that guarantees the chance to buy a ticket if their team makes the bowl, effectively reserving a seat for a price. If the team doesn’t make it, fans have only paid for the option rather than the full cost of a seat at the game. Professor Robert L. Phillips, doctoral candidates Santiago Balseiro and Caner Gocmen, and Guillermo Gallego of Columbia University analyze ways of offering options to maximize revenue in sports tournaments where the final two teams are unknown. They show how tournament organizers can increase profits while giving fans the benefit of a guaranteed seat should their team make it to the final.