NFL Sunday Ticket Pricing Model
Problem
The NFL sells Sunday Ticket only as a full bundle of all teams, despite most consumers wanting just one team. I asked: is pure bundling the profit-maximizing strategy for a statutory monopolist with antitrust exemption, and under what consumer preference structure does it dominate alternatives?
Method
I built a monopoly pricing model where consumers have heterogeneous, negatively correlated willingness-to-pay across teams. I derived profit-maximizing prices under three regimes (pure bundling, component pricing, and mixed bundling) and compared how much surplus each extracts. The framework draws on Adams & Yellen (1976) and Schmalensee's conditions for bundling dominance.
Result
Pure bundling is profit-maximizing when consumer valuations are negatively correlated across goods, which fits NFL fandom well: most fans care deeply about one team and hardly at all about the others. Bundling lets the league extract more revenue than team-based pricing would, which explains why à la carte options are unlikely to ever appear. Full derivations are in the paper below.