Economics of the Rugby Sevens

After a week of hard economics revision, I had a three-day break at the Hong Kong Rugby Sevens. The four countries I am presently associated with [India, Hong Kong, Australia, and England] either did not play or did not play very well. But I thoroughly enjoyed myself nevertheless. Below are some of my thoughts about the economics of the Sevens.

Ticket prices
A three-day ticket cost HKD 1080. But I think that the price could have been raised considerably without any loss in total revenues earned. In my opinion, the price elasticity of demand at the current price is very inelastic, which means that prices can rise along with rising total revenue. This is due to huge demand for Sevens tickets: Hong Kong Stadium was absolutely packed on Saturday and Sunday, and many many people simply could not get hold of tickets. This implies excess demand of a product that is available only in limited amounts; the solution is to raise prices. I approximate that prices can rise to HKD 1600 or thereabouts to make price elasticity of demand unitary; that is, up to the above price, total revenue will rise. Furthermore, there is no close substitute for going to the Sevens, so the cross-price elasticity will also be very low.

Absence of price discrimination
The organisers of the Sevens clearly have a monopoly due to the control of inputs (only they can get so much rugby and beer at the Hong Kong Stadium at the same time) and the network effect (being seen at the Sevens is cool). But they sell every ticket at the same price. As I have said above, the overall price needs to rise, but practising some price discrimination would help raise total revenues even more. The South Stand is the only stand where alcohol is allowed to be consumed, so it is obviously very popular. Being the stand where the party is, there are very long queues to get in. At one point the queue was over 4 hours long, and later it was closed off because the South Stand was full. Selling South Stand tickets at, say, HKD 200 above the normal ticket price would eliminate queues and allow for higher revenues. On Sunday, I woke up at 4.30 in the morning to help get two rows of seats for the man who gave me a free ticket. There were so many people trying to get the same two rows; clearly, price discrimination is needed here too. I realise that this price discrimination would result in higher costs for the organisers -- more guards will be needed to check the different tickets, for example -- but these could be factored into the price hikes.

I obviously feel rather guilty for missing three days' worth of revision, and that's why I wrote this economic analysis of the Sevens. But only now do I realise that the opportunity cost of writing this has been the loss of 20 minutes of sleep. Bah!