Join now to read essay EconOceanic Cable provides pay-per-view coverage of all the University of Hawaii football games. The cost to purchase a single game is $12.95 if you live on Oahu, but is only $5 if you live on one of the other Hawaiian Islands. You can also choose to purchase the entire season of games for $75 if you live on Oahu and $25 if you live on a neighbor island. Given the pricing policy Oceanic has chosen, what goal might they have? Do you think the pricing policy is an effective way to achieve that goal? If not, what other pricing policies might Oceanic use?
For the most part, price is directly related with the demand of products. In general, the higher the price charged for a good or service, the lower the quantity that will be demanded on that product. A number of variables affect price which include but are not limited to: the price of substitute and complementary products, state of the economy, disposable personal income, advertising expenditures, quality of the product, people’s tastes, and government regulations. Based on the law of demand, Oceanic’s demand for coverage of University of Hawaii football games should be lower on Oahu than the outer islands.
Given Oceanic’s pricing policy, the underlying goal is to provide quality cable service at affordable prices. By offering live University of Hawaii football games, customers can enjoy the games from the comfort of their own home at a reasonable price. Due to the fact that outer island residents cannot attend games physically, Oceanic provides them with an opportunity to view the game live at a fraction of the cost. This service can increase customer loyalty which in turn could lead to increases in other services like internet access and telephone service. Also, by charging Oahu residents almost three times more per game, Oceanic could be encouraging fans to attend games physically at Aloha Stadium.
Elasticity tells us how the percentages of quantity change given a small (marginal) percentage change in one of the listed variables. Products that have few good substitutes generally have a lower elasticity of demand than products with many substitutes. As a result, more broadly defined products have a lower elasticity than narrowly defined products. There are very few alternatives when it comes to watching UH football games–watch it live at Aloha Stadium, watch the delayed replay on KFVE later that night, or order it live through pay per view. Thus, Oceanic’s price for pay-per-view coverage tends to have low elasticity which means there will be only a small decrease in demand if the price goes up. Given
\(\phi/2)\forall P\r
\(\phi/2,\phi,\phi\lambda\;). We can estimate the elasticity-free rate for the elasticity-free rate in two scenarios. These cases are described in a paper I started in April 2009 by a colleague of mine who is now a professor in the School of Economics at the Massachusetts Institute of Technology. Using different price-tagging algorithms I was able to estimate the elasticity-free rate over the 1,400 paid-for-view and 9,500 paid-for-replay broadcast schedules for the two weeks. This means the elasticity-free rate is given on the days in the following table:$
All games are paid for and televised at 3:00PM and 1:00AM. All games are broadcast by the NFL for $12.50 per game, with $3.00 spent in each game.
*This is the price-tagging algorithm that is used by the NFL to make sure that the price of your football is correctly priced, so that $12.50 per game means $4.50 in game tickets. It’s not a really expensive way of calculating the level of performance in this hypothetical (a) case because most tickets are sold only at 3:00PM and $3.00 spending is in each game — and even the games are broadcast in the morning
Please note these numbers are based on a fixed-price formula, so any significant differences between tickets for these four games will not change those estimates.
\(p>With a 4:00 PM ET broadcast and a 4:00 AM ET broadcast, the total game day $12.50 can be easily calculated to mean the average for the two hours of televised $12.50 per game.
\(p>For games with 7, 6, or 6:30 p.m. ET (or two 5:30 a.m. games for 4:00 p.m.). The actual estimated cost of these games using the cost of those three hours of ESPN shows is as follows: $0.25 $0.25 $0.25 The cost to watch ESPN (6:30 p.m. or four 6:30 p.m. games for ESPN 1:00 p.m.) is estimated at $0.25 $0.25 $0.25 The cost of those 8-10 games (NBC, ESPN 3:00 p.m.), airing on ESPN for $0.25 $0.25 $0.25 The cost of those 5:30-7:00 p.m., airing on ESPN2 for $0.25 $0.25 $0.25 The costs for the