11
$\begingroup$

IMHO, scalping tickets is no different from legitimate arbitrage unless manipulative.

Iirc, arbitrage increases surplus and hindering scalping is setting a price ceiling which leads to deadweight loss or something like that.

So why do some states ban scalping tickets?

I'm assuming that such states think there is some perceived harm to their economy. Strangely enough, why tickets? Why not bags, clothes or phones?

Improve this question
$\endgroup$
16
$\begingroup$

There is a good Planet Money episode on ticket scalping; I recommend it.

The reason for banning ticket scalping has nothing to do with economic harm, and everything to do with making the arts (or sports, whatever) accessible to people of more-modest means. Consider the fact that artists could, if they wanted, just auction off all the seats to their shows, capturing all the surplus and putting scalpers out of business.*

If artists did this, however, lots of people wouldn't be able to afford to see popular artists perform. Many artists (the Planet Money episode uses Kid Rock as an example) want to try to make sure that their fans have a reasonable shot at attending, which means that they want to price the tickets low... but the only way this can work is if resale is illegal.

It's been suggested that artists (again, the same goes for sports teams) might benefit from making low-priced tickets available to fans for two reasons: because they plan on selling stuff to people once they're inside, and because an artist-fan relationship is hopefully not just a one-shot transaction. The idea is that fans who can attend the occasional show might be more likely to buy recordings, merchandise, and tickets in the future, providing the sort of long-running support that can keep an artist viable over many years.

[P]erformers who undercharge their fans can paradoxically reap higher profits than those who maximize each ticket price. It’s a strategy similar to the one employed by ventures like casinos and cruise ships, which take a hit on admission prices but make their money once the customers are inside. Concert promoters can overcharge on everything from beer sales to T-shirts, and the benefits of low-priced tickets can accrue significantly over the years as loyal fans return.

*For the most part— there's some amount of resale that is sort of frictional, which arises from people not being able to attend a show and unloading tickets so they don't just eat the full cost, etc.

Improve this answer
$\endgroup$
10
  • $\begingroup$ See this blog post for some more accounts of artists who don't want to be seen ripping-off their fans: cheaptalk.org/2010/06/03/… $\endgroup$
    – Ubiquitous
    Jul 17 '15 at 7:11
  • 1
    $\begingroup$ If artists want to sell stuff to customers once they're inside, I dont see why they wouldnt want to select the richest fans as customers. $\endgroup$
    – FooBar
    Jul 17 '15 at 13:46
  • $\begingroup$ The comparison with casinos doesnt hold: Additional seating in casinos (or, creating additional casino seating/area) is cheap, while the same is not true for limited space in a stadium for any given artist. $\endgroup$
    – FooBar
    Jul 17 '15 at 13:49
  • $\begingroup$ @FooBar It's not about the ability to expand capacity to more customers (which anyway always has a marginal cost), it's about the risk of excess capacity. If a casino prices admission too high, they end up with empty seats which are taking no money, but still costing floor rent, staff cover, etc; the additional profit from door takings doesn't cover this loss. The same may be true of a gig: the loss in merchandise sales from pricing fans out of the market outweighs the loss in ticket revenue from discounting the tickets. $\endgroup$
    – IMSoP
    Jul 17 '15 at 14:18
  • 1
    $\begingroup$ @BCLC Exactly. And the point made by IMSoP about excessive risk doesn't sound too plausible to me either, unless you believe that rich people care so much less about their (more expensive) tickets that they are more likely than poor people to ditch their tickets. $\endgroup$
    – FooBar
    Jul 24 '15 at 17:57
3
$\begingroup$

I'm going to look more generalized at the producer's side of things.

  • Either the producer wants to use price discrimination to maximize his own profits. In that case, earlier tickets may be cheaper, and later bought tickets are more expensive. Then, all tickets scalpers do is reap the producer surplus. It would be similar to a student buying items at student discount and then selling for the full price.
  • Or the producer has some alternative reasons for not doing the above mentioned: He is giving up profits, in order to achieve alternative goals. For example, as dismalscience mentioned, he may be interested in giving many customers the idea that they could afford a ticket (for whatever reason). In that case, the ticket scalper has disabled the producer from doing so, effectively again reaping producer surplus.

tl;dr: No matter how you look at it, ticket scalpers are freeloading off the producers and reaping producer surplus.

Side comment: Just because something is arbitrage, doesnt mean it is good for the economy. Hence, declaring something as arbitrage is no ground what-so-ever for legalizing it

Improve this answer
$\endgroup$
4
  • 1
    $\begingroup$ But, to play devil's advocate, there are many things that people do in other markets that reduce producer surplus—such as starting up a competing business. Far from banning such practices, we actively encourage them. Why should protecting producer surplus be considered a legitimate policy objective in this specific industry? Do you think it is because we believe the process of scalping is sufficiently costly to offset any efficiency gain, or do you have some other justification in mind? $\endgroup$
    – Ubiquitous
    Jul 17 '15 at 15:57
  • 1
    $\begingroup$ @Ubiquitous Introducing competition increases consumer surplus. This? Not so much. Perhaps to some extent competing ticket scalpers will reduce end game prices, but I don't think that they're ever cheaper than the listing price. $\endgroup$
    – FooBar
    Jul 17 '15 at 16:05
  • $\begingroup$ If scalping were legalised then free entry into the scalping market should eliminate the excessive profits that everyone seems so worried about. Also, see here for an account of ticket resale below face value—which anti-scalping laws presumably prevent: cheaptalk.org/2013/01/30/anti-scalping. $\endgroup$
    – Ubiquitous
    Jul 17 '15 at 19:41
  • $\begingroup$ @Ubiquitous my micro theory is somewhat rusty, but isnt usually the introduction of competititon welfare improving? [Perhaps this is a separate question]. At least it does increase the quantity produced. I dont see that happening here either. So all that is happening is a redistribution of surplus, but not an increase in it. $\endgroup$
    – FooBar
    Jul 18 '15 at 11:52
2
$\begingroup$

It is my impression that the fact that "scalping tickets" is considered illegal (or at least restricted) in many parts of the world, may be due to the following reasons:

A) Transactional: A ticket has a consumer price printed on it. This means that the supplier of the service has announced/committed to a price at which he is willing to provide the service/product. This creates a different transactional framework than the one where by design a market works auction-style, or bargaining-style. In many places, re-selling such products at prices higher than the printed one, is legally considered a violation of consumer rights, even if only indirectly, because, in such cases one has to at least clearly disclose also the nominal price (i.e. the seller should "shout" something like "I sell a ticket that has a nominal value of 10 USD for 13 USD "). Have you ever heard such an announcement?

B) Tax: In many cases, ticket scalpers are not official wholesalers (who in any case would have bought the tickets at prices lower than the nominal one, and then would resell it at the nominal price), but rather, undeclared entrepreneurs buying tickets at the nominal price as though they were consumers, and counting on excess demand to sell them at higher prices in under-the-counter transactions.

C) Ethical: While event-going cannot be considered life-critical, it does have a strong element of "psychological/emotional" (i.e. not-rational) desire. When one counts on such an aspect to sell at a price higher than the actual supplier of the object/service of desire demands, it is more often than not deemed as "exploitation", in many cultural settings. While from the point of view of Economics, this is just market-clearing, we should not forget that how Economics views the world is not necessarily how societal ethics (or ideals), do: Although no third party is forcing an event-goer to go to the event, societies tend to consider a buyer driven by such desires as "having the right to be protected from any negative side-effects of his own desires" -and themeselves as having the obligation to provide such protection.

An interesting article/review of the matter, with some examples regarding anti-ticket-scalping regulation in the USA can be found here. The article discusses also the underlying worries/views that appear to lead to such rules and regulations.

It appears that ticket-scalping is treated as a special case of scalping, and has its own legislation.

Improve this answer
$\endgroup$
10
  • 1
    $\begingroup$ "In many places, re-selling such products at prices higher than the printed one, is legally considered a violation of consumer rights." - legally? Can I sue the gas station for selling Arizona tea (with "99c" printed on it by the manufacturer) for more than a dollar? $\endgroup$
    – Random832
    Jul 17 '15 at 12:58
  • 1
    $\begingroup$ That is very surprising and I think this answer needs a list of examples with citations. In particular if the claim is that this is a general law allowing manufacturers to enforce maximum retail prices rather than a special one that only applies to event tickets (as many jurisdictions do have laws specifically targeted at scalping) $\endgroup$
    – Random832
    Jul 17 '15 at 13:11
  • 2
    $\begingroup$ Why is this "basic consumer protection"? You don't have a right to have a product sold to you at all, let alone at a given price. You're not being misled as to what price you can buy it at (unless the product is on display with the printed price visible). This law, if and where it exists, creates a right for manufacturers and other producers to enforce their will on the middlemen, not consumers. $\endgroup$
    – Random832
    Jul 17 '15 at 13:15
  • 1
    $\begingroup$ @Random832 Re: the last comment. But tickets, exactly, are "on display with the printed price visible". And the same goes for many other products. And it is indeed the case for many products that large manufacturers do impose the consumer pricing policy, middlemen notwithstanding. Also note that my answer offers some "reasons why" - it does not evaluate what are the consequences, or whether these reasons are "justified". $\endgroup$
    – Alecos Papadopoulos
    Jul 17 '15 at 13:36
  • 1
    $\begingroup$ I really do think you need a citation showing what jurisdictions consider it to be illegal to sell any product (i.e. not just event tickets, since such laws wouldn't be based solely on the fact that it has a price printed on it) at a price higher than the one originally printed on it by the producer. $\endgroup$
    – Random832
    Jul 17 '15 at 13:47

Your Answer

By clicking “Post Your Answer”, you agree to our terms of service, privacy policy and cookie policy

Not the answer you're looking for? Browse other questions tagged or ask your own question.