The Feds have begun an investigation into the sale of tickets to Kansas Jayhawk men's basketball tournament games, and maybe season ticket sales, according to a story in this morning's Kansas City Star. At this point, an athletic department fundraiser, who was formerly the director of ticket sales, has been put on administrative leave. In addition, ticket brokers from around the nation have been subpoenaed.
Colleges and universities employ a type of price discrimination, the two-part tariff, when selling their tickets. With the two-part tariff, a person typically pays a flat fee that essentially gives him the right to buy some product. Then he has to buy the product.
In the world of college sports, the flat fee comes in the way of donations to the athletic department or to an athletic scholarship fund. Schools realize that people were willing to pay more for tickets than they actually had to pay, and the two-part tariff is one way to capture some of that difference.
But with any type of price discrimination, there is an incentive to arbitrage as long as someone has access to tickets at a reduced price.
We know very little about the KU situation right now. We know a man has been put on leave, that KU has launched an internal investigation, and that ticket brokers have been contacted. But because there is a question of illegal ticket sales, understandably, nobody is talking.
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