Positive Price Discrimination at South Africa 2010

As you can see from several entries on the IB Economics Blog today, Africa is suffering a significant reduction in growth in the global slowdown. The IMF summit taking place in Tanzania this week is looking for ways to combat this. However, demand for some scarce goods remains very inelastic, and it seems likely that even in the midst of the gloom tickets for the football World Cup in South Africa in June-July 2010 will be over-subscribed. Ticket prices for sports events offer opportunities for price discrimination and maximum price setting, and the ticketing process for the World Cup in South Africa takes advantage of this on behalf of local people rather than the supplier, and seeks to ensure that some consumer surplus is available to them. This could be an important factor for a country with almost 22% unemployment, two quarters of negative GDP growth, GPD per capita of $10,400 in 2008 but a GINI index of 65 (2005) indicating significant inequality in the distribution of income (compared with 38 in the EU).

Looking through the prices for the tickets, which you can now apply for in the first of five sales phases, you can see that Category 4 tickets are available to South African residents only. One essential element of successful price discrimination is the ability to prevent ‘market seepage’, a process whereby consumers who have purchased a good or service at a lower price are able to re-sell it to those consumers who would have normally paid the expensive price. So it is essential for FIFA to ensure that only South African residents get access to the tickets, which cost about one third of the tickets in the next price band and, for the group matches, one eighth of the price of the most expensive seats. Take a look at the FIFA 2010 website to find out how the tickets are being protected for purchase by South African residents only, and what steps there are to prevent ticket touts from buying them up and selling them on the inevitable black market.

Questions to consider:
The cheapest tickets at the last World Cup in Germany were approximately $51. Why do you think that tickets for 2010 are cheaper?

Using the FIFA website, find out how a South African resident could apply for tickets in category 4. How does the supplier ensure that there is no market seepage to non-residents?

What measures can you see in place to ensure that no tickets from Category 4, or from any other category, are made available on the black market?