Recently, I've been reading about Michigan's attendance woes (which only really count as "woes" if you consider a college selling out 95 percent of a 100,000-seat stadium at $75+, plus an unspecified donation per ticket, woeful), and it occurs to me that lay people and economists think very differently about how prices are set, and how much people consume at those prices. For example, non-economists think that rising athlete pay increases ticket prices, when in fact it is the reverse—rising ticket prices (and the ability of athletes to drive a hard bargain) results in higher athlete pay. Or the idea that a long waiting list for tickets is a sign of successful marketing, while economists see that as a case of prices being set far too low, resulting in excess demand that can't be captured.


This came to a head on Twitter, where I interacted with John U. Bacon, who thinks the problem is that Michigan's Athletic Director Dave Brandon treats the football team too much like a business, and that ethos of commercialism has driven away fans. He also adds that ticket prices are too high and the team is losing. You can read some of Bacon's views here.

Mr. Bacon is clearly a dedicated Michigan Man, and wants Michigan to be great again. But as an economist, I can tell you he has gotten the causal story backward. Michigan is not struggling to fill the Big House because Brandon is running Michigan like a business, and oh by the way, the team is also losing. Michigan is losing, and as a result, the ticket price levels Brandon set to fill the Big House for a winning team are resulting in less-than-full houses for a crappy team.


Tom Waits once semi-sang "There's nothing wrong with her that $100 won't fix." I still have no idea what that means, but there is nothing wrong with (a) Michigan football or (b) Dave Brandon's marketing that a 12-1 record won't fix. Sellouts are great, but when you can't get students to come to the games even when the price is $3 for two tickets (free with any Coke) that is a sign that price is not the problem. The problem is that not enough people want to watch Michigan football. At any price.

The waiting list has shrunk for the same reason. I would wager that ten years ago, if you had asked someone on the waiting list if they would pay 25 percent more for the tickets than face value to get off the waiting list, they would have. A standard rule of economics is that if more people want to buy your product than you can satisfy, you've underpriced the good. Sometimes, underpricing makes sense: e.g., a sold-out concert is more fun for the attendees (and probably the band) than a half-full arena. But as a marketer (and face it, an athletic director is a mix of an HR/marketing exec and a donation solicitor), Brandon's job it to find the highest price he can that shrinks that waiting list nearly to zero.

Problem is, the current Michigan team is losing, terribly, and there just isn't enough demand to fill the stadium at the price Brandon settled on. And that matters if you think sellouts and a packed waiting list are the goal, rather than, say, revenue and profit maximization. Just less than a sellout is pretty close to optimal, economically. But the real issue (one I agree with Bacon on, by the way) is that the students don't want to show up AT ANY PRICE. That has long-term repercussions for future demand, as my business partner Dan Rascher recently wrote:

"Current students are not that important [to ticket sales], per se," said Dan Rascher, a sports management professor at the University of San Francisco. "But you're trying to turn those current students into former students who are still fans decades later. You want students, when they become alumni, to have that attachment and come back for the games, and that's what's concerning athletic departments."


The question, then, is whether the current crop of Michigan Men and Women are turned off by excessive commercialism, high prices, and a generally non-reverent-to-Bacon's-view of tradition, or instead simply don't want to come because watching a mediocre team get beat is less fun than watching a great team play exciting football.

The natural experiment we could run is simple enough. Dave Brandon could go hyper-commercial—sell ads all over the stadium (unlike the present bare look), jack ticket prices up even higher, do everything a business person would do to maximize profits, but at the same time spare no expense to recruit a fabulous coach and fabulous recruits. If the Bacon thesis is correct, fans would reject this new Michigan team as being un-Michigan-like. But it seems much more likely that a few Big Ten championships later, we'd all realize there was nothing wrong with Michigan that winning wouldn't fix. Just ask Jim Harbaugh.


Harbaugh's name has been floated as a possible savior for the Michigan program and he provides a good example. Harbaugh's last college gig was at Stanford, which like Michigan (maybe more, if that's possible) prides itself on doing things the Right Way, academically and athletically. Harbaugh turned the team around on the field at the same time that Bob Bowlsby, and then Bernard Muir, oversaw a rapid rise in ticket prices and a generally more frenetic game-day atmosphere, all of the things Bacon decries. Rock music blares out of the stadium speakers, electronic scoreboards feature the "drum cam." And of course, attendance is way, way, up. Credit Harbaugh and his successor, David Shaw, but of course, the real answer is Stanford has spent a lot of money to make itself into the destination for good football players with good grades and test scores.


In 2006, Stanford went 1-11 and, despite having a brand new stadium, reconfigured for a smaller fan base, only sold about 80 percent of the seats available. In 2013, the team sold every seat for every game while posting a 10-2 regular season record. Or look at Berkeley in 2006, when Cal spent most of the season in the Top 25 and more than 64,000 fans per game saw Marshawn Lynch and company play in a stadium at the end of its lifespan. In 2013, in a much nicer stadium, average attendance dropped below 50,000 as the team went 1-11.

High ticket prices and commercialism didn't create the sellouts at Stanford Stadium, but they also didn't get in the way when Andrew Luck started making Stanford football good again. And the Cal story is the same as the Michigan story: When the team isn't fun to watch, demand drops.


The cause of decreased demand at Michigan is not that ticket prices are too high. The cause is the on-field product isn't worth four hours of any busy college kid's life right now. And getting spanked by power teams (and Utah) doesn't feel good. The effect of losing is decreased demand and thus empty seats. You start to win, they'll resume attending. At whatever profit-maximizing price you want to charge.

Andy Schwarz is an antitrust economist and partner at OSKR, an economic consulting firm specializing in expert witness testimony. Follow him on Twitter, @andyhre. Photo via Getty.