Rafi Mohammed

Want to Buy a Multi-Day Pass at Disney World? Be Prepared to be Fingerprinted...

Posted on February 19th, 2008 (0 Comments)

Mike, a longtime friend, recently called me intrigued by Disney World’s ticket pricing strategy. Taking his family on a highly anticipated week long trip to the Magic Kingdom, Mike was rightfully looking for the best value. What amazed him are the discounts Disney offers on its multi-day passes. While a one day pass is pricey, $116 - as more days are purchased, the price of each additional day drops drastically. For example, the price differential between a 4 and 5 day ticket is only $3. The additional per day price after 5 days is a meager $2 per day. Very interesting strategy…

Of course, the reason why Disney offers these significant discounts is to capitalize on the law of diminishing marginal utility, a cornerstone principle of economics. As with practically everything in life, the more we consume, the less we value. The first day at Disney is exciting – it’s thrilling to see the attractions and meet Mickey, Goofy, and Donald. This translates into a high willingness to pay. However, by the 4th or 5th day of visiting the Magic Kingdom, the thrill understandably begins to wane.

The goal of volume pricing is to set a price that recognizes the value consumers place on an additional product decreases. In other words, most customers won’t pay $116 for a fifth day – so offer a price that keeps them coming to the park. As it turns out, Disney’s offer of an additional $2 per day is keeping Mike's family at Disney for the sixth and seven days of their trip, instead of visiting nearby Universal Studios. $2 seems awfully low…don’t you think? Presumably Disney is hoping families will buy refreshments.

After learning about this pricing strategy, my first thought is there must be a black market for these tickets. Invariably, some multi-day purchasers won’t use all of their days and want to resell their leftover days. Why not show up at Disney and “scalp” for tickets – a win-win transaction should be able to be brokered. If I’m going for just one day, there’s certainly room to negotiate between the $116 retail price and the $2 someone paid for an extra day of their multi-day pass.

This is where it gets interesting…Disney has truly thought of everything. The first day you use a multi-day pass, you are electronically fingerprinted and your fingerprint is attached to the pass. On subsequent visits, your finger is scanned to check that it matches. The bottom line: you can’t sell the remaining days of your pass unless by a freak of nature, your fingerprint happens to match the person on the street you sell it to.

Whenever a seller offers a volume discount, there’s always the possibility that it can backfire. For example, jumbo sized fries priced to entice a diner to pay more can instead be shared by two diners who otherwise would have more profitably purchased a regular size each. That’s a risk that sellers take when offering a volume discount.

While the ACLU is probably not pleased, you have to hand it to Disney. The Magic Kingdom has eliminated the “arbitrage” risk of volume discounts and ensures that its multi-day discount truly captures the diminishing returns of its customers.

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