Optimal Control for Dynamic Pricing and Advertising of Ticket Selling for the Sport and Entertainment Events

Abstract

This article is the result of a research project in dynamic pricing and advertising to determine the number of sale tickets for a sporting or an entertainment event. For this purpose, a dynamic optimal control model was used to maximize the organizer's profit. To provide the best estimate, all potential variables and costs in ticket sales were considered. These included free ticket transfers, food and beverage sales, promotional goods, insurance, and other services (e.g., customer service) to ticket buyers. Using a piecewise continuous function (arrival intensity) we applied variables that are not controlled by organizers (e.g., impacts of seasonal change on demand) to determine the number of tickets for sale (capacity planning) and their dynamic and optimal price, considering the dynamic optimal advertising costs. Among the strengths of this study is the application of two piecewise continuous functions to analyze the effect of unsold tickets numbers on customers’ purchasing behavior. The impacts of such factors have not been studied in previous studies.

Keywords

• pricing
• advertising
• capacity planning
• optimal control
• pontryagin's maximum principle