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scalper can buy all the tickets to a popular game and sell them all at 10x the price How is this a problem, especially one requiring regulation? Nothing has c

by dtby 17y ago

scalper can buy all the tickets to a popular game and sell them all at 10x the price How is this a problem, especially one requiring regulation? Nothing has changed from your original formulation, except apparently that he's now making 'too much money.'

leelin 17y ago
Because then the very wealthy scalper has a monopoly, and the monopoly power allows for profit-maximizing pricing, which causes dead-weight loss. It's better the scalper sell 50% of the tickets at 10x (and let 50% rot) than all of the tickets at 2x (and have nothing rot). The scalper will let some tickets rot to preserve the 10x pricing because this is a repeated game. If people know that he'd rather let tickets rot than lower prices at the last moment, they'll have no choice but to buy at 10x or miss the game.
- imgabe 17y ago
  But there's already a natural monopoly on tickets isn't there? You can only buy them from the venue that the show is taking place at. Surely if they see that the market will bear 10x the price they're asking, they'll just raise the face value price on the ticket. This would make it unprofitable for the scalper to buy them all and resell them, since he could no longer ask 10x the price.
ubernostrum 17y ago
Scalpers often have the time, money and incentive to build automated systems which hammer ticket services to buy up tickets which otherwise would have been sold directly to people attending an event. Whenever you hear about a concert or sporting event selling out within a ridiculously short period of time (sometimes 30 seconds after online sales open), it's because of this, and represents the creation of inefficiency rather than the remedying of it. Also, first-party ticket vendors have been known to actively partner with third-party resellers to essentially eliminate the original market. Ticketmaster, for example, owns an online scalping service (TicketsNow) and there have been repeated allegations that they give preferential treatment to their own scalping subsidiary.
- cturner 17y ago
  represents the creation of inefficiency rather than the remedying of it. I can't think of a situation where scalpers are not contributing to efficiency. I think you've focussed on intentions of particular parties in the scenarios rather than the net market and that this has taken you to an incorrect conclusion. With scalpers, the venue venue has their risk removed (they lock in their sales early), and the scalpers increase liquidity by removing the venue's monopoly power over pricing the event. And price discover is better. Now either the consumers are able to buy the tickets from the scalpers in a competitive market (and often with increased convenience), or the scalper can destroy the tickets and nobody can turn up the the event. They generally won't - that's irrational. Even if they did - it's not an ineficiency for the purpose of the original marketplace. In fact, it creates opportunity for extra production: the venue can arrange a late-entry-for-unfilled-spot policy which allows them to get people in and sell some tickets twice. Or the venue can detect scalpers and create a dynamic price market of their own and maximise their volumes. In the situation where multiple scalpers get the tickets and plan to sell them, there has been a massive gain in efficiency. The scalpers have removed the venue's monopoly power over ticket prices and created a second market place which will have more effective price discovery. Either way, the event provider is focussing on what they're good at, and the scalpers at what they're good at. Scalping is entreprenerial in spirit and good for the system in practice.
  - Retric 17y ago
    The ticket seller might want a specific audience for demographic reasons, and or a sellout crowd for reputation reasons. Scalpers destroy this without giving a kickback to the ticket seller. They also increase the cost to the ticket buyers thus reducing market efficiency.
    - cturner 17y ago
      > The ticket seller might want But that's unrelated to market efficiency. People in this thread are trying to define "seller not getting what they want" or "particular type of consumer not getting what they want" into market inefficiency, and it doesn't work like that. I'm not an economist. Perhaps I'm wrong, but in this case please make the case in terms of a definition you can cite. (In practical terms, they seller could reach that aim by giving people a cashback at a random time during the event for those who turned up - for example swapping a single ticket for a cashback at the end of the show as people were leaving the gates. The reason venues don't like scalpers is that they don't like price discovery because of reasons like these: (1) they want to be able to make a killing on late tickets, even if it's only for a few events per year and (2) they want to be able to sell tickets to poor people through some mechanisms at one price, and tickets to richer people through different mechanisms at another price, such as through coupon clipping or discount books or through ticket offices in poor areas, (3) they don't want tickets won through competitions being given away. That way they get to charge wealthier people a higher price than time-rich people who are typically poorer. That's inefficiency.)
leelin 17y ago
Can't edit my orig post anymore: http://en.wikipedia.org/wiki/Deadweight_loss http://en.wikipedia.org/wiki/Deadweight_loss Deadweight loss from monopoly pricing power.

by dtby 17y ago

leelin 17y ago

Because then the very wealthy scalper has a monopoly, and the monopoly power allows for profit-maximizing pricing, which causes dead-weight loss. It's better the scalper sell 50% of the tickets at 10x (and let 50% rot) than all of the tickets at 2x (and have nothing rot). The scalper will let some tickets rot to preserve the 10x pricing because this is a repeated game. If people know that he'd rather let tickets rot than lower prices at the last moment, they'll have no choice but to buy at 10x or miss the game.

imgabe 17y ago
But there's already a natural monopoly on tickets isn't there? You can only buy them from the venue that the show is taking place at. Surely if they see that the market will bear 10x the price they're asking, they'll just raise the face value price on the ticket. This would make it unprofitable for the scalper to buy them all and resell them, since he could no longer ask 10x the price.

ubernostrum 17y ago

Scalpers often have the time, money and incentive to build automated systems which hammer ticket services to buy up tickets which otherwise would have been sold directly to people attending an event. Whenever you hear about a concert or sporting event selling out within a ridiculously short period of time (sometimes 30 seconds after online sales open), it's because of this, and represents the creation of inefficiency rather than the remedying of it. Also, first-party ticket vendors have been known to actively partner with third-party resellers to essentially eliminate the original market. Ticketmaster, for example, owns an online scalping service (TicketsNow) and there have been repeated allegations that they give preferential treatment to their own scalping subsidiary.

cturner 17y ago
represents the creation of inefficiency rather than the remedying of it. I can't think of a situation where scalpers are not contributing to efficiency. I think you've focussed on intentions of particular parties in the scenarios rather than the net market and that this has taken you to an incorrect conclusion. With scalpers, the venue venue has their risk removed (they lock in their sales early), and the scalpers increase liquidity by removing the venue's monopoly power over pricing the event. And price discover is better. Now either the consumers are able to buy the tickets from the scalpers in a competitive market (and often with increased convenience), or the scalper can destroy the tickets and nobody can turn up the the event. They generally won't - that's irrational. Even if they did - it's not an ineficiency for the purpose of the original marketplace. In fact, it creates opportunity for extra production: the venue can arrange a late-entry-for-unfilled-spot policy which allows them to get people in and sell some tickets twice. Or the venue can detect scalpers and create a dynamic price market of their own and maximise their volumes. In the situation where multiple scalpers get the tickets and plan to sell them, there has been a massive gain in efficiency. The scalpers have removed the venue's monopoly power over ticket prices and created a second market place which will have more effective price discovery. Either way, the event provider is focussing on what they're good at, and the scalpers at what they're good at. Scalping is entreprenerial in spirit and good for the system in practice.
- Retric 17y ago
  The ticket seller might want a specific audience for demographic reasons, and or a sellout crowd for reputation reasons. Scalpers destroy this without giving a kickback to the ticket seller. They also increase the cost to the ticket buyers thus reducing market efficiency.
  - cturner 17y ago
    > The ticket seller might want But that's unrelated to market efficiency. People in this thread are trying to define "seller not getting what they want" or "particular type of consumer not getting what they want" into market inefficiency, and it doesn't work like that. I'm not an economist. Perhaps I'm wrong, but in this case please make the case in terms of a definition you can cite. (In practical terms, they seller could reach that aim by giving people a cashback at a random time during the event for those who turned up - for example swapping a single ticket for a cashback at the end of the show as people were leaving the gates. The reason venues don't like scalpers is that they don't like price discovery because of reasons like these: (1) they want to be able to make a killing on late tickets, even if it's only for a few events per year and (2) they want to be able to sell tickets to poor people through some mechanisms at one price, and tickets to richer people through different mechanisms at another price, such as through coupon clipping or discount books or through ticket offices in poor areas, (3) they don't want tickets won through competitions being given away. That way they get to charge wealthier people a higher price than time-rich people who are typically poorer. That's inefficiency.)

leelin 17y ago

Can't edit my orig post anymore: http://en.wikipedia.org/wiki/Deadweight_loss http://en.wikipedia.org/wiki/Deadweight_loss Deadweight loss from monopoly pricing power.