THE WELFARE EFFECTS OF TICKET RESALE
Phillip Leslie
Alan Sorensen
Working Paper 15476

We develop an equilibrium model of ticket resale in which buyers’ decisions in the primary market, including costly efforts to “arrive early” to buy underpriced tickets, are based on rational expectations
of resale market outcomes. We estimate the parameters of the model using a novel dataset that combines transaction data from both the primary and secondary markets for a sample of major rock concerts.
Our estimates indicate that while resale improves allocative efficiency, half of the welfare gain from reallocation is offset by increases in costly effort in the arrival game and transaction costs in the resale
market.

I’ve not read the whole thing but the potential welfare loss appears to be related to cost associated with “brokers” exerting effort (and thus forcing others to exert greater effort) to obtain tickets in the primary market. In a situation where the effort required is relatively low (e.g. internet ticket sales) my gut reaction is that the social welfare loss is pretty small compared to the allocative gains.

Another interesting aspect to their model is that 31% of resellers do so below face value (i.e. at a loss) because of things like schedule conflicts. An alternative explanation is that they realised that the demand for Britney tickets just really isn’t that high…

Another thing to consider is that if the ticket seller (who is linked to the band) charges huge prices, then it looks like the band is ripping off their fans (even though their customers are more than willing to pay that high price).

This is a very emotive issue and I have had several really fun arguments with concert-going colleagues about the social good of scalpers. Usually they refuse to listen, they consider the original price of the tickets to be the market price.

Good point.

Anyone done a study on the elasticity of hot pie demand relative to ticket price?

Do performers get a cut of sales from unrelated merchants (e.g. f&b)?

@steve
From a PR perspective, its not a bad thing to underprice and have excess demand. That way you can perpetuate the excess demand if buyers’ behaviour is conditional on the outcome of the previous event. However, perhaps the problem is that they do not know what the price that would just clear the market is and prefer to err on the side of lower price (and excess demand).

Thus scalping is a transfer away from the prmoter/band to the scalper.

If I assign the rights to manage who gets to see my work/taste my food etc to a third party, do I have any right as to how it is priced? Unless it is explicitly laid out, have I given the promoter carte blanche wrt pricing?

Aside from the qustion of fakes, the only reason I can come up with why promoters don’t like scalping is because it shows that they got the pricing wrong.

The artist/service providers should be relatively indifferent or perhaps even slightly pleased if it means that those attending are willing to pay higher prices not just to attend but to also purchase merchandise. [Possibly the argument about getting it wrong also applies to the artist-promoter relationship as well?]

Not sure Custer found it so pleasurable.