Blokie State’s football program has risen to the ranks of the elite with postsea
ID: 1174666 • Letter: B
Question
Blokie State’s football program has risen to the ranks of the elite with postseason bowl games in each of the past 10 years, including a national championship game. The Blokes (as the fans are called) fill the stadium each game. Season tickets are increasingly difficult to find. In response to the outstanding fan support, Blokie State has decided to use its bowl revenues to expand the stadium to 75,000 seats. The administration is confident that all 75,000 seats can be sold at the normal price of $40 per game ticket; however, Frank Pinto’s job, as athletic director, is to get as much revenue out of the stadium expansion as possible. In addition to stadium boxes for the truly endowed, Frank would like to take this opportunity to repurpose existing seats. A certain number of seats (yet to be determined) would be set aside for premium ticket holders who would pay $200 per ticket for the privilege of 50-yard line seats with chair backs and access to indoor concessions. The question is, how many fans would be willing to pay such a premium? If too many seats are designated in the premium sections, they could remain vacant. Too few premium seats would lose potential revenue for the program. Frank has decided that if the plan has any chance of success, unsold premium seats should not be sold at reduced rates. It would be better to donate them to local charities instead. Gathering data from his cohorts at peer institutions, Frank has put together the following probability distribution of premium ticket holders. The data begin with 1000 tickets since Frank already has requests for 999 tickets from alumni donors. He is asking for your help in performing the analysis.
Answer ALL of The Following Questions
1. Discuss how using revenue management could determine how many seats should be reserved for premium ticket holders.
2. Considering your answer in (b), and the possible outcomes, how much total revenue (i.e. regular and premium) can be expected from ticket sales?
3. Provide summary of considering the possible outcomes, and which approach do you think may yield the most potential revenue?
No Premium Tickets Probability 1,000 0.10 5,000 0.30 10,000 0.24 15,000 0.15 20,000 0.10 25,000 0.06 30,000 0.05Explanation / Answer
1 & 3) Premium seats and schedule to yield the most potential revenue : No Premium tickets Probability Expected premium ticket Premium reve Normal seats Normal revenue Total revenu 1000 0.1 100 20000 74000 2960000 2980000 5000 0.3 1500 300000 70000 2800000 3100000 MAXIMUM 10000 0.24 2400 480000 65000 2600000 3080000 15000 0.15 2250 450000 60000 2400000 2850000 20000 0.1 2000 400000 55000 2200000 2600000 25000 0.06 1500 300000 50000 2000000 2300000 30000 0.05 1500 300000 45000 1800000 2100000 The seats reserved for premium ticket holders to have maximum total revenue = 5000 tickets 2) Total revenue can be expected from ticket sales = $3100000