5 ms·

By moving the goods to those willing to pay more for them, which increases consumer surplus, which means the market is more efficient. It's fairly basic economi

by ikeboy 7y ago

By moving the goods to those willing to pay more for them, which increases consumer surplus, which means the market is more efficient. It's fairly basic economics.

comex 7y ago
Increasing the price should reduce consumer surplus, not increase it. If the manufacturer of an item increases its price and thus their profit from it, then in principle the increased profit can drive them to manufacture more of the item, avoiding deadweight loss due to insufficient supply. However, that doesn’t apply if a reseller is the one making the profits! And in any case, some of the concrete examples cited (tickets to concerts and Broadway musicals) have an essentially fixed supply; it’s hard or impossible to simply increase production. Separately, moving goods toward those willing to pay more for them is to some extent equivalent to moving them toward those who care more about them, which could be said to improve efficiency in terms of how much personal happiness is gained per unit. However, it also moves the goods toward those who are simply wealthier. And there are other possible proxies for personal interest besides price, ones that aren’t as affected by wealth. One of them is a person’s willingness to research in advance when certain tickets will go on sale, and be online at that time to snag them before they sell out – in other words, the system that bots are used to subvert. This system has its own biases (favoring those who are organized, have more flexible schedules, or are simply in a more favorable timezone), but it‘s still considered to be reasonably fair, at least when it’s not being subverted.
- ikeboy 7y ago
  Increasing price only reduces consumer surplus when it's the same consumers who buy. This is not the case when there's a shortage of tickets at the original sale price, which is the only scenario where scalping is profitable. Scalping unambiguously increases Kaldor-Hicks efficiency under a simple model. You can argue that efficiency isn't the best way to be fair, and it's fairer to someone to not have a ticket due to random luck rather than being priced out, perhaps. But scalping increases efficiency, which is all I claimed.
  - comex 7y ago
    > Increasing price only reduces consumer surplus when it's the same consumers who buy. This is not the case when there's a shortage of tickets at the original sale price, which is the only scenario where scalping is profitable. I don’t see how that follows. If a consumer can’t buy a ticket from the original seller due to a shortage, there’s no guarantee that the original sale price was at (or even near) the maximum price that that particular consumer was willing to pay. Therefore, that consumer might also be willing to buy from a scalper. It would be in the opposite case, if there wasn’t a shortage, that someone who doesn’t buy could be assumed to be unwilling to pay the price. In practice, I’d expect a decent fraction of those consumers to be near their maximum price, since if not, we could conclude that the original seller irrationally set their price far too low. (But the original price must have been set somewhat too low if a significant shortage exists.) Still, depending on the markup charged by the scalper, I wouldn’t be surprised if a significant fraction of consumers actually would be willing to pay it. As a practical example, according to an article from last year about Hamilton tickets [1], among seats originally sold for $69-$179, a few were on sale for >$10,000 each, but the average resale price was $412. $10,000 will obviously price out most consumers, but going from ~$100 to ~$400 might not, considering the extremely high desirability of Hamilton seats. > Scalping unambiguously increases Kaldor-Hicks efficiency under a simple model. You can argue that efficiency isn't the best way to be fair, and it's fairer to someone to not have a ticket due to random luck rather than being priced out, perhaps. But scalping increases efficiency, which is all I claimed. If I understand correctly, it increases efficiency if the scalper could have hypothetically purchased their ticket from someone who was deprived the opportunity to buy from the original seller, instead of from the original seller directly, and still made a profit by reselling it. But that doesn’t seem true. There’s no reason to think that person who “won the lottery” would be willing to sell the ticket for the same price they bought it for. Instead they would likely sell it for a similar price to what the scalper wants to charge. At best the scalper can gain some value on the margin by taking on the risk that the ticket won’t sell, but not much value. [1] https://www.seattletimes.com/entertainment/theater/how-did-hamilton-tickets-get-so-expensive-and-what-does-that-mean-for-future-big-events/ https://www.seattletimes.com/entertainment/theater/how-did-h...
    - 7y ago

by ikeboy 7y ago

By moving the goods to those willing to pay more for them, which increases consumer surplus, which means the market is more efficient. It's fairly basic economics.

comex 7y ago

Increasing the price should reduce consumer surplus, not increase it. If the manufacturer of an item increases its price and thus their profit from it, then in principle the increased profit can drive them to manufacture more of the item, avoiding deadweight loss due to insufficient supply. However, that doesn’t apply if a reseller is the one making the profits! And in any case, some of the concrete examples cited (tickets to concerts and Broadway musicals) have an essentially fixed supply; it’s hard or impossible to simply increase production. Separately, moving goods toward those willing to pay more for them is to some extent equivalent to moving them toward those who care more about them, which could be said to improve efficiency in terms of how much personal happiness is gained per unit. However, it also moves the goods toward those who are simply wealthier. And there are other possible proxies for personal interest besides price, ones that aren’t as affected by wealth. One of them is a person’s willingness to research in advance when certain tickets will go on sale, and be online at that time to snag them before they sell out – in other words, the system that bots are used to subvert. This system has its own biases (favoring those who are organized, have more flexible schedules, or are simply in a more favorable timezone), but it‘s still considered to be reasonably fair, at least when it’s not being subverted.

ikeboy 7y ago
Increasing price only reduces consumer surplus when it's the same consumers who buy. This is not the case when there's a shortage of tickets at the original sale price, which is the only scenario where scalping is profitable. Scalping unambiguously increases Kaldor-Hicks efficiency under a simple model. You can argue that efficiency isn't the best way to be fair, and it's fairer to someone to not have a ticket due to random luck rather than being priced out, perhaps. But scalping increases efficiency, which is all I claimed.
- comex 7y ago
  > Increasing price only reduces consumer surplus when it's the same consumers who buy. This is not the case when there's a shortage of tickets at the original sale price, which is the only scenario where scalping is profitable. I don’t see how that follows. If a consumer can’t buy a ticket from the original seller due to a shortage, there’s no guarantee that the original sale price was at (or even near) the maximum price that that particular consumer was willing to pay. Therefore, that consumer might also be willing to buy from a scalper. It would be in the opposite case, if there wasn’t a shortage, that someone who doesn’t buy could be assumed to be unwilling to pay the price. In practice, I’d expect a decent fraction of those consumers to be near their maximum price, since if not, we could conclude that the original seller irrationally set their price far too low. (But the original price must have been set somewhat too low if a significant shortage exists.) Still, depending on the markup charged by the scalper, I wouldn’t be surprised if a significant fraction of consumers actually would be willing to pay it. As a practical example, according to an article from last year about Hamilton tickets [1], among seats originally sold for $69-$179, a few were on sale for >$10,000 each, but the average resale price was $412. $10,000 will obviously price out most consumers, but going from ~$100 to ~$400 might not, considering the extremely high desirability of Hamilton seats. > Scalping unambiguously increases Kaldor-Hicks efficiency under a simple model. You can argue that efficiency isn't the best way to be fair, and it's fairer to someone to not have a ticket due to random luck rather than being priced out, perhaps. But scalping increases efficiency, which is all I claimed. If I understand correctly, it increases efficiency if the scalper could have hypothetically purchased their ticket from someone who was deprived the opportunity to buy from the original seller, instead of from the original seller directly, and still made a profit by reselling it. But that doesn’t seem true. There’s no reason to think that person who “won the lottery” would be willing to sell the ticket for the same price they bought it for. Instead they would likely sell it for a similar price to what the scalper wants to charge. At best the scalper can gain some value on the margin by taking on the risk that the ticket won’t sell, but not much value. [1] https://www.seattletimes.com/entertainment/theater/how-did-hamilton-tickets-get-so-expensive-and-what-does-that-mean-for-future-big-events/ https://www.seattletimes.com/entertainment/theater/how-did-h...
  - 7y ago