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(Solved): Listen to this Planet Money podcast Episode 874: Hot Dog Hail Mary Pricing at the food concessions ...

Listen to this Planet Money podcast Episode 874: Hot Dog Hail Mary Pricing at the food concessions at professional sports stadiums like AT&T Park in San Francisco or SAP Arena in San Jose is notoriously high. Hot dogs for $7, beer for $16 ... you get the idea. The Atlanta Falcons' management got tired of listening to fans' complaints about these high prices at their old stadium, so they tried a radically different approach to pricing when they moved into their new Mercedes-Benz Stadium in 2017. Some background information: "Seventy percent of revenue for N.F.L. teams comes from league-wide television, sponsorship and merchandise contracts, so they do not need to rely on money from food and beverage sales in their stadiums as much as teams in other leagues." (Source: NY Times, Jan 25, 2018) After listening to the podcast, answer the following questions. 1) Why are customers willing to pay such high prices? 2) What was the effect of these high prices on the customer experience of attending Falcons games? 3) What does the reaction of customer demand to the slashing of prices in half tell you about the price elasticity of demand for concession products? Calculate it. [If you don't know what price elasticity of demand is, don't guess -- look it up. Make sure you know what the formula is for calculating it, and what value ranges are considered elastic vs. inelastic.] 4) What was the effect of the price cut on how happy customers were with the experience of attending games? 5) Before implementing the price cuts, Falcons' senior management thought that it would result in a $4 million loss of revenue. Why did they still decide to go ahead with the cut anyway? Hint: Answering this question requires that you think broadly about the Falcons' overall business model -- in other words, where do they make their money? It also requires that you think about what they knew at the time they made the decision, which is the only way that decisions are ever made.

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