Anderson, Indiana

Club has clever method of raising prices

Thu, 2012-10-18 08:52 -- univcomm
October 18, 2012

The Economic Club of Indiana has the mission of providing a public forum for the discussion of economic issues within the state. The most prominent method of so doing is by means of a luncheon they host approximately once per month at the Indianapolis Convention Center with a guest speaker addressing political, economic, or social matters. The cost of attending a luncheon is $30 for members and $35 for nonmembers. The number of members in the organization is low as there is no great benefit to the membership — which costs $60 — outside of the discounted luncheon tickets. Since the speakers are so diverse, it is rare for many to attend all nine luncheons and even if they did they would be paying a $60 membership fee to only save $45 on meal tickets.

The number of seats available in the Convention Center is fixed and cannot be changed (size of meeting facility being inflexible). The demand for any one speaker is normally below the set price (an imposed floor that does not move). This creates a scenario in which there is a surplus number of seats available for any one of the normal speakers. When announcing the 2012-2013 lineup of speakers, however, a surprise one was tossed in. Among the lesser known guests was a name that is recognized by many in, and out, of the world of economics: Ben Bernanke, the chairman of the Federal Reserve. The number of individuals interested in seeing Mr. Bernanke is much different than that of the other speakers. If you were drawing the change in demand on a graph, the curve would be far more inelastic — less sensitive to increases in price — and the imposed price now acts as a ceiling instead of a floor. At the set price, there is no longer a surplus of tickets, but now a shortage.

Since the Economic Club has a mission “to promote an interest in, and enlighten its membership on, important governmental, economic, and social issues,” simply raising the price for tickets to Bernanke could be perceived as opportunistic, cold-hearted, or even counter to their purpose. To not raise the price, however, would go against many basic tenets of economics and conceivably give birth to a black market wherein the shortage would be solved by individuals buying the tickets at $35 and reselling them themselves at a higher rate (equilibrium will be found one way or the other).

The solution the club arrived at was genius: they limited the purchase of Bernanke tickets only to members of the Economic Club. This effectively raised the price for those tickets (membership is still not required for other speakers) from $35 to $95 and bundled in the perceived value of the membership. There is a hope that new members will then be more likely to attend other speakers in the series (having already paid the fee necessary to save $5 on each) and have the added benefit of reducing the surplus tickets for those events as well. This creatively solved the problem that the organization was faced with and brought in additional revenue.

Anderson University is a private Christian university of 2,600 undergraduate and graduate students in central Indiana. Anderson University continues to be recognized as one of America's top colleges by U.S. News and World Report, The Princeton Review, and Forbes. Established in 1917 by the Church of God, Anderson University offers more than 65 undergraduate majors and graduate programs in business, music, nursing, and theology. The Falls School of Business is one of Anderson University’s largest academic departments offering eight undergraduate majors as well as MBA and DBA programs. The school is accredited by the Accreditation Council for Business Schools and Programs (ACBSP) and is a member of the Christian Business Faculty Association (CBFA).

Columns from Anderson University’s Falls School of Business are published Tuesdays in The Herald Bulletin. Tuesday’s columnist is Emmett Dulaney, who teaches marketing and entrepreneurship.