04/23/2012 08:01 am ET | Updated Jun 23, 2012

Dynamic Pricing: Fair or Foul

The Metropolitan Opera recently announced a new ticket pricing policy for the coming year that, among many other things, included explicit mention of dynamic pricing. This approach to pricing has been practiced for years by airlines, Broadway producers and many not-for-profit performing arts organizations. Dynamic pricing is a simple concept: initial ticket prices are raised when demand for a particular performance is high. Thus two people sitting side-by-side at the theater may have paid very different prices for their seats.

A form of dynamic pricing has been practiced by most theaters for years: when tickets are not selling they are discounted, often substantially, and sometimes given away for free. This form of dynamic pricing penalizes those who are most loyal and purchase early. It encourages the type of behavior we wish to discourage.

While others disagree with me, I do not see dynamic pricing as immoral. As long as advertising does not suggest that prices are lower than they actually are, I do not believe that raising prices when it is clear that a given performance is very popular violates a trust with the audience.

In fact, dynamic pricing rewards the most loyal audience members by giving early ticket buyers a discount. We are acknowledging that those who took a risk and purchased early are getting a return on their risk-taking and also for providing much-needed cash early in the producing process.

Dynamic pricing is a bigger moral dilemma for not-for-profit organizations since these organizations are not meant to be seeking a profit but, rather, to serve a community. Opponents to dynamic pricing argue that raising ticket prices in the middle of a run is unfair to those who wait, for whatever reason, to make their ticket purchase. Others suggest that it is unseemly to indicate that one performance is worth more than another by raising prices for a particularly successful production. (But haven't many organizations had higher prices on weekends for years and years?)

Despite the heartfelt concerns expressed by those who find this form of pricing abhorrent, dynamic pricing has won many converts. It has allowed many not-for-profit organizations to earn a higher percentage of revenue (by taking in more at the box office) and to take some pressure off of the fundraising effort (since the more that is earned, the less one has to raise to balance the budget.) This has been a great boon during the recent economic downturn when contributed income has been harder to come by.

I hope that as dynamic pricing becomes more and more accepted -- and it already is in practice in many institutions -- audience members will become smart consumers and buy early. This will benefit both them and the organizations they patronize in the short and the long terms. In the short-term, early consumers will pay less and in the long-term, they will get a better product. For when earned income rises, arts organizations virtually always feel empowered to spend more on their art -- this must be the best outcome of dynamic pricing.