If Pittsburgh Were in Game 7 of the World Series Would You Pay $400 Million to Be There?
Last week, MLB announced their Postseason Ticket Reservation program. This program allows fans to buy the option to later buy a postseason ticket at face value should their team reach the playoffs. You choose the team and game, and then pay $10 for the Division Series, $15 for the Championship Series or $20 for the World Series. If the team you chose gets to that series you have the right to buy a ticket for the chosen game at face value. If not, you get nothing (i.e. your money is not refunded). For the DS you can choose Game One, Two or Three, which are the first, second and third home game for your chosen team, not necessarily the first, second and third game of the series.
So if you choose Game One, you have the right to buy a ticket for the first game of the series (if you have the home team for the series) or the third (if you have the away team for the series). If you choose Game Two you go to Game Two if your team is home and game four if your team is away and the series lasts that long. If you choose Game Three the option is worthless unless your team makes the playoffs, and is home, and the series goes to five games. You get the picture. It works similarly for the CS and WS.
Ok, so should you take part in this program? First, answer these questions: would you like to see a playoff game? Is it worth it to pay above the face value of the ticket to ensure you can go? If so, by how much? That is how much more than face value would you be willing to pay for a given game, assuming that game were to take place. Let’s call that amount, x. Now assuming the probability of the game taking place is p, the the value of the option is:
Value = (1-p)*0 + p*x
Read the rest of this entry »