The Economics of Ticket Scalping

An economist will say that the existence of secondary markets – where tickets can be resold again – indicates a lack of supply, a low price, or both.

For example, event promoters are encouraged to sell as many tickets as possible in order to profit from the sale of concession stand items such as food, beverages, and other concessions. They are then compelled to set ticket prices low.

Scalpers profit from such situations as they have the opportunity to arbitrage (make a profit by buying and selling something), which would not exist in a world with tickets that are plentiful and priced according to demand.

Read more: Coming soon to a cinema near you? Ticket prices shaped by demand.

Online reselling platforms also put upward pressure on prices by making tickets easier to resell, while simultaneously allowing ticketing companies to double dip on commissions and booking fees. The Australian Competition and Consumer Commission is taking ticket re-seller Viagogo to the Federal Court, alleging the company engaged in deceptive pricing.

Some Australian States have passed legislation that limits the price at which tickets can be resold. However, policymakers and promoters are still struggling to keep pace with technological advances. These make scalping easier than ever.

Why does scalping occur?

Economists are puzzled by the continued existence of the scalping and resale market. Why do ticket prices remain so low if tickets for major events are undervalued to the extent that a whole industry is based on their resale?

The event promoters may be risk-averse and prefer the certainty of selling out to the uncertainty of ticket prices that could potentially be too high.

This is in line with studies that show that people prefer events to be held at venues where they are packed, rather than a venue with a small number of attendees. This encourages event promoters, as other people influence the demand for tickets.

It is also possible to have the idealistic belief that fairness will prevent event promoters setting too high prices. This idea is often expressed in the media that tickets should be in the hands “true fans”.

The pros and cons to scalping and reselling

There is a case to be made that ticket-scalping actually benefits concertgoers and sports fans. Scalpers distribute tickets only to those who are most interested in them, or as economists would say, increase the allocation efficiency on the market.

Secondary Markets for Tickets allows potential buyers to express how much they are willing to pay to attend the event. Tickets can be purchased at a fixed price, but only if they are first-come-first served. This will leave out some people. These secondary markets allow for these mutually beneficial exchanges.

Online platforms that allow you to buy and sell tickets actually increase the efficiency of allocation. The platforms provide buyers and sellers with an ever-increasing amount of information. They also reduce the time and costs associated with purchasing each resold Ticket (known as Transaction Costs).

Read more: London Olympics tickets: will the poor get through the door?

But scalping and secondary ticket markets are not without their downsides. Enterprising scalpers may be encouraged to buy up large proportions of available tickets in order to maximise their profits.

has shown that this “rent-seeking” can reduce (or even eliminate) any gains made in allocation efficiency.

It is also a question of fairness and whether ” true supporters” are priced out of seeing their favorite team or performer. Then there’s the fact that scalpers steal profits from the artists, performers or sporting personalities who are on display.

What can be done to stop scalping?

The “pricing bots”, as demonstrated by Uber , a competitor to Taxi and soon to be available in some Australian Cinemas, can adjust prices based on consumer demand in real-time.

This technology would reduce the scalping of tickets by giving event promoters more control over pricing. As previously mentioned, some artists and groups are reluctant to raise prices. To combat this, they have taken a number of drastic measures.

Kid Rock has, for instance, embarked upon a series of ” US$20 best night ever ” tours. The name implies that almost all tickets at supermarkets and venues are priced at US$20. It is clever to make the ticket price transparent and clear up front in order to prevent tickets being sold over face value.

Kid Rock also tends to perform at the same venue. The total number of tickets available in a city increases, and the secondary market can offer a lower price for a ticket.

Read more: The economics behind Uber’s new pricing model

The Glastonbury music festival has begun printing pictures of the ticket purchaser on every ticket. This may ensure the purchaser of the key and the attendee are the same person. However, the high cost of administering such tight controls makes them viable to only the most profitable of events.

Harry Styles will play Sydney’s Enmore Theatre in the latter part of this year. A similar system is expected to be implemented. Before entering the venue, ticket holders will have to check in at a ” Check-in.”

Taylor Swift has announced to fans that they can “boost their place” in the virtual queue by taking part in Swift-related activities, such as watching her music videos or purchasing her music.

Swift’s stated objective to “get tickets into the hand of fans…NOT bots or scalpers” is admirable. However, many have viewed this as little more than an opportunistic money grab by her most loyal supporters.

These measures are likely to frustrate ticket scalpers more than they will deter them. Scalpers will continue to sell tickets at low prices as long as major events’ tickets are priced below market value.

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