Some professional sports teams charge fans a one-time lump sum for a personal seat license. The personal seat license allows a fan the right to buy season tickets each year. No one without a personal seat license can buy season tickets. After the original purchase from the team, the personal seat licenses usually can be bought and sold by fans-whoever owns the seat license in a given year can buy season tickets-but the team does not earn any additional revenue from this buying and selling. Suppose a new sports stadium has been built, and the team is trying to decide on the price to charge for season tickets.
a. Will the team make more profit from the combination of selling personal seat licenses and season tickets if it keeps the prices of the season tickets low or if it charges the monopoly price? Briefly explain.
b. After the first year, is the team's strategy for pricing season tickets likely to change?
c. Will it make a difference in the team's pricing strategy for season tickets if all the personal seat licenses are sold in the first year?