From the Boston Globe:
Jordan’s shoppers sitting pretty if Sox win
Thousands of Red Sox fans could be sitting in free seats soon – if their team wins the World Series.
Jordan’s Furniture, the Warren Buffett-owned local chain famous for commercials featuring brothers Barry and Eliot Tatelman, earlier this year promised free furniture – including sofas, dining tables, beds, and mattresses – to customers who bought between March 7 and April 16, so long as the Sox win the fall classic. Now, there’s a real possibility that Jordan’s could be paying back millions to customers.
“Imagine yourself sitting on that sofa, watching that game, and knowing it’s free if they win,” said president and chief executive Eliot Tatelman, who is already appearing in new commercials reminding fans of his commitment to pay them back.
He wouldn’t disclose how much Jordan’s might have to pay out, but the money won’t come out of Jordan’s bank account: Tatelman bought an insurance policy to cover any losses in the event the Sox win the title.
Still, Tatelman said the chain took almost 30,000 orders during the contest. One customer stands to get back $40,000, Tatelman said.
“He did his whole house,” he said.”
Now, I’ve got no desire to get these guys in trouble (even if their commercials were pretty annoying when I lived in Boston), but it’s interesting to note that since the Sox were about a 10 percent shot to win the series at the start of the season, the guy who paid $40,000 was really paying $36,000 for furniture and putting $4,000 on the Sox. If this one gets the nod, expect to see more of these promotions.
It’s all ridiculous and frustrating of course, but I think it would only be a problem if they said that one couch was $1500 and an identical one was $1600 but came with the Red Sox option, otherwise there is no consideration in excess of the couch price. (It might likewise be a problem if they raised prices just before the contest and advertised a “sale” right after the contest.)
If I were to purchase, say, a lamp from a customer who bought it from the store during the promotion, and then the Red Sox win, could I claim the payout?
Or how about a purely financial derivative — I buy the payout option from the lamp owner, but not the lamp. (I have plenty of lamps already, thanks.) The option is worth either $0 or the price of the lamp, depending upon whether the Sox win.
Given 30,000 orders and assuming an average order value of $1,200 each, that is $36,000,000 in potential claims. If the claims were tradable, seems like you could have a pretty liquid little prediction market.
Ah, checked the store’s website: lamp idea no good, the promotion required purchase of a mattress, dining table, sofa, or bed.
Here is a link to the promotion page, which has links to Terms and Conditions and FAQs pages. Note the FAQ answer:
Scratch the idea for a liquid little prediction market in Boston.
“Tatelman bought an insurance policy to cover any losses in the event the Sox win the title.”
As we all know (via Marginal Revolution some time ago), the first X Prize ($10 million) was also paid by a “hole-in-one” insurance contract.
http://www.msnbc.msn.com/id/6167761/.
And no doubt the furniture store took out insurance on the promotion. This is no different than win a free car hole in one contests and the like. That raises the question whether insurance is gambling. Normally purchasing insurance is considered the opposite of gambling which begs the question that selling insurance therefor must be gambling.
That is clever marketing for the furniture store. The insurance covers the losses and they win either way. The free press surely helped get their name in front of some potential new customers.
Gambling and sports are always going to happened. As they said in Caddyshack, “Gambling is illegal at Bushwood”.