This is quite a good piece, here is one excerpt:
For the scalpers' business to work, they will often need to limit the
supply of tickets–and tear up the extras instead of selling them at
face value. Or in other cases, they create a perceived shortage of
tickets by dribbling them out slowly at auctions with fans not knowing
whether tickets are really available. The result of this is unhappy
fans and empty seats. This has some potentially bad long-term
consequences. On Broadway, to take one example, theater owners are
eager to create buzz around a show by keeping seats filled. If the
venue is going to be half-empty, they'll even "paper the house" by
having anyone connected to the production distribute free tickets.
Short-run gains for scalpers create long-run problems for theater
owners and performers.
This is different from the usual explanation that lower prices create desirable clientele effects. The piece also offers a good discussion of Eric Crampton and Trent Raznor as well. Hat tip goes to Felix Salmon.
It’s funny to see the article describe the possibility that we may see the emergence of a two-tiered pricing system when most venues literally have multiple tiers at varying prices.
The article tells why the artists might not like scalping,but the rest of it is poorly reasoned. The economics of scalping only hurt fans if the scalpers have a monopoly on the available tickets. That might have been the case in Beijing, but almost no other places.
There is a bit of economic insight in the article but it is mostly moralizing. Ticket sellers could not only “end scalping tomorrow” by printing names on tickets, they could “end scalping tommorow” and increase their take by selling raising prices until demand equals supply, but the author doesn’t mention that.
The commenters sourcreamus and ben above also makes an important point. The venue orginally has monopoly pricing power and should raise prices so high that some seats remain empty. But the scalpers do not have monopoly pricing power, because there is more than one scalper in competition. In that scenario, the equilibrium price is the price at which all seats are filled. (Bill Gates, faced with the $150K price, could simply turn to the next scalper and say “will you beat that price”?)
Tyler, you’ve linked to this same post before! But it was very interesting, so thanks.
I wrote a reply to this on my blog at ticketeconomist.com
Gimein’s article oversimplifies the issue by failing to acknowledge that primary market ticket sellers (such as ticketmaster and Live Nation) have a great influence on the number of tickets that end up on the resale market and on resale price. Just look at how much Miley Cyrus tickets are going for on the resale market now that they have constrained supply so tightly with paperless tickets.
Scalpers do not like to tear up tickets, they are good at creating perceived shortages, but they will sell a ticket before loosing money on it.
I have to say you are right about economies
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