give people incentives to pay early

I went to an event the other night that cost $32 to attend, $24 if you bought your tickets early.

Now I was 95% sure I was going to attend, so in theory it would make economic sense for me to by my ticket early. I would have saved $8 if I bought the ticket early and since I was only 5% unlikely to go, my expected loss if buying a ticket early was only $1.20 (much less than the eight dollars).

But I elected to buy my tickets at the door. Why?

First, a few stipulations:
1. there was a 100% that this particular event would not sell out. so unlike most events where I feel compelled to buy my tickets early (like a Robin Williams comedy performance), I knew I could get tickets at the door.

2. I had inside information. I had been to this event in years past and I figured it would be run in a similar way.

So here’s why I chose to get my tickets at the door: Time.

– Buying the tickets online takes time. In this case, it takes quite a but of time as their web site is somewhat clunky.

– now usually buying the tickets ahead of time allows you to save time later. Not in this case. I assumed (it turned out correctly) that vast majority of people would be buying tickets a ahead of time and that their name was on a list. That means there would be a long line for people waiting to get their name checked off the list (it turns out the line was about 20 minutes long). The line to buy tickets, by contrast, would be really small (it turns out the line had zero people on it and I would right up, gave them $32 in cash, and walked right into the event).

So — in this case my calculation was — would I be willing to pay $6.80 ($8.00 – $1.20) to skip standing on line for 20 minutes in the freezing cold. To me, $6.80 was a real bargain.

In the future, the event could do a much better job of getting people to pay early by (1) making their web sign-up faster, (2) making the pre-pay line go faster, and (3) by charging more for people that pay at the door.

2 thoughts on “give people incentives to pay early

  1. Scott Sanders

    Interesting – this is common practice in the grocery industry (and others, too, I’m sure). If payment for an order is received within, say, 10 days, a discount of perhaps 2% is applied to the order. In other words, it’s the opposite of charging interest in delinquent accounts – and a broader application of discounting for early RSVPs.

    Reply
  2. Dan

    Cool little number crunch. This reminds me sometimes of toll booths, where (at least in MA) you can get ‘fast lane’ in your car and cruise right through. or you can pay the toll with the collector in cash. and usually, the ‘fast lane’ line is so backed up, that its actually faster to just pay cash. And then take into account the hassle of going into the RMV and signing up for ‘fast lane’…

    Reply

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