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10-09-2007, 02:38 PM
  #88
Crease
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Quote:
Originally Posted by seventieslord View Post
So more tickets = less money? Wow. Why didn't MLSE think of that? They should just reduce it to 10,000 seats and watch profits skyrocket!

Think about it. the 20,000 who are already there will pay just as much as they are now. There may be lesser demand for the additional 10,000 seats, but you can still charge something for them. 10,000 X something = a lot.
Actually, as the supply curve shifts to the right and assuming demand doesn't change at all, the equilibrium point drops. At some point, adding too many seats will create a surplus and force overall prices down just to break even.

Regardless, the profit matrix is a bell-curve. Starting with zero seats and increasing, profits will rise will rise, then continue to rise at a rate of diminishing returns. Eventually those returns are negative and costs will outweigh revenues.

I can guarantee every arena built has gone through a profit matrix to determine the number of seats that will maximize profits.

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