How much are you willing to pay for U.S. Open golf championship tickets to Pinehurst this June, plus a place to stay during the event? Some tournament patrons have paid up to $50,000 for a one-week rental house in past years. In the rental housing market, prices for the week are determined strictly by “what the traffic will bear”—clearly a hefty amount for a premium rental location. Private homeowners can offer rentals for up to two weeks, if they wish, without having to pay tax on rental income they receive during the Open.
But there’s more to price than meets the eye in this case. Local accommodations for the U.S. Open in Pinehurst required as much as three years of advance planning, booking, and waiting time. If reports are correct, 2,700 rooms in Moore County were booked solidly for the 2005 U.S. Open back in 2002. Would-be renters for the event have incurred costs in the form of advance reservations, deposits, and payments in ways that raise price beyond the number of dollars alone involved in the process.
Since the United States Golf Association received over 150,000 ticket requests for 40,000 spectator tickets, it had to use some rationing scheme to fill requests. Unwilling to raise price, the Association resorted to a lottery to decide which requests would be honored. Even though some official ticket prices looked steep, they apparently weren’t high enough.
At official prices, two tickets that allow 7-day access to all events and practice rounds at Pinehurst sold for $1,100. Online re-sale sites are still offering tickets that give the same level of access, but $1,100 will only get you one all-access ticket in the cyber market.
Private re-sales are probably closer to the true market value of the tickets, but tricky. Re-sales of event tickets in North Carolina may not legally exceed the original price plus $3.00, excluding tax. The scarcity of marketable tickets no doubt makes their price even higher than it otherwise would be.
Golf tournaments and other public entertainments are not the only products for which time becomes part of the purchase price of the good, or where luck or other arbitrary means determine who is a “winner.”
Galatoire’s, a well-known New Orleans restaurant, became famous for its fabulous menu and its long, long waiting lines. Until recently, Galatoire’s did not accept any reservations, offering service to diners on a first-come, first-served basis only. Though part of the restaurant now offers seating by reservation, lines stretching down Bourbon Street have been a hallmark of the eatery for many decades.
The auto market also has examples of the kind of non-monetary price that consumers pay in terms of extra waiting time. Toyota’s Prius, a gas/electric hybrid sedan with a sticker price close to the Civic or Jetta, appealed to so many potential customers that an order backlog appeared right after its introduction. Rather than raise price, Toyota had customers wait six months to a year for their car, particularly if they wanted a choice of color or features. Like the golf and dining patrons above, Toyota customers wound up paying a money price plus an inconvenience or waiting cost for their goods. Since then, Toyota and other manufacturers have introduced hybrid SUV’s, and the Prius crunch has abated. You can guess what car customers are backordered and waiting for now.
Does waiting really add to the “cost” of an item for the consumer? Yes, though the added costs are mostly opportunity costs, options and opportunities that we miss while we spend time and other resources during the waiting period. Of course, all of the vendors could have eliminated the wait by simply hiking the dollar price of their product. That would eliminate rationing by patience, forethought, or luck, none of which offer a manifestly “better” or more “fair” outcome than simple, efficient money prices.
In markets, those that want the goods immediately can get them, if they offer a price attractive to sellers. And that amounts to plan coordination without the three-year time horizon.