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the economics of ticket scalping

  • Category :
  • business and economics
  • January 3rd, 2008

    Like everything else, tickets has a supply and demand. A ticket is an option to redeem something valuable (i.e. a pleasant experience) in the future. For a particular concert, supply is govern by the number of seats in the venue.

    Let’s ignore the artist and the social implication for the moment. From the event organizer’s economic perspective, it’s goal is to maximize profit by selling the highest number of ticket at the highest possible price before the ticket expires. Much like a good IPO, a perfect ticket price is one that won’t have much secondary demand at a higher price immediately after the sale. It means everyone who is willing to pay up to and more than the ticket price for the experience is satisfied. There is no one else willing to pay more than what the ticket is being sold for. Of course this never happens. That where ticket scalper comes in. The put in capital ad buy up these futures, provide a liquid secondary market that picks up the pricing inefficiency by the event organizer so everyone can be satisfied.

    One of the problem is the complication that comes with non regulated scalpers. There is no way to determine if the ticket is legit, leaving the secondary ticket buying in a vulnerable situation. Another one is the common view that it is the social responsibility of the event organizer to offer the experience to the public who can’t afford the high ticket price by subsidizing it with it’s own potential profit. But nonetheless, economically speaking ticket scalping improve the efficiency of ticket pricing.

    Now comes this site. http://nyc.tablexchange.com/ It’s a market place for people to buy and sell reservations. There is just something wrong about it. When you make a reservation at a restaurant, most of the time you don’t need to put any capital in. There is no mechanism to prevent someone from taking up the entire restaurant at no cost, then reselling it for a profit. Unless the restaurant start charging for reservations, which it won’t, since that will likely turn customer away.  What they could do is to ask for a credit card at the time of the reservation, do a $1 auth, and charge the card a fix amount at no show.  That does not prevent scalpers, but does present a form of identification and opportunity to reject the reservation if the card has been blacklisted.  But unlike ticket scalpers, honestly I don’t see any value that this site has for the restaurants if the reservation is indeed demand.

    Entry Filed under: business and economics

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