Restricting ticket resale is economic illiteracy
13 August 2018
SUGGESTED
Housing and Planning
ITCU
Government and Institutions
Today, Ticketmaster announced that it will close its two secondary ticket resale sites, SeatWave and Get Me In. From October, they will be replaced by a system which allows fans who no longer want a purchased ticket to resell it via Ticketmaster – but for no more than the original cover price, though with a 15% surcharge on each ticket to cover the original booking fee.
Though the online vendor claims this was always their long-term plan, there are reasons to be skeptical. Given the timing of the decision, it seems far more likely to have been politically influenced – coming a month after the Irish government backed a bill banning the resale of tickets for more than face value, and with competition authorities eyeing up similar measures in the UK.
The principle established here – that nobody who has bought a ticket to an event can resell it to a willing purchaser for more than they paid for it – betrays astonishing economic illiteracy.
Consider the following questions. In what other market is this true – and what would be the effect of similar regulation in any other market? Imagine, for example, if you bought a house or car and were banned from selling it for more than you paid for it? Or suppose that people who buy products such as grain, or oil, or finished products of any kind were banned from selling them at a markup?
The result would be to make the market in these products extremely inefficient. Above all, it would cause misallocation of resources on a mass scale – meaning that valuable goods would not move through exchange to those who valued them most highly.
Campaigners against ticket resale claim that high prices result, in the first place, from so-called ‘Ticket Touts’ buying up many tickets at the asking price and then selling them on for a profit. This, too, is nonsense.
Firstly, they can only sell the tickets for more if there are buyers willing to pay that price. If there are, this tells us the original price was too low (as a result, the demand for the tickets was too high for the number available). Secondly, resellers cannot keep the price up or put it up. As soon as they sell the tickets the price they get will fall if they try to charge more than the market rate.
Imagine a situation in which no individual could buy more than one ticket – but they were able to resell them for whatever they could get. The price would immediately be bid up to a higher level, if the initial price was too low for the demand (this is also how dynamic pricing software of the kind used by airlines works).
What will be the result of these changes? Well, it certainly won’t be easier for people to obtain tickets to see popular stars like Ed Sheeran. The available tickets will still sell out in a matter of minutes – except now, if you miss out, you will not be able to buy one no matter how much you are prepared to pay.
Primary ticket issuers will have the added difficulty of guessing what the clearing price is for every event. If they set it too high there will be many unsold seats, if too low there will huge queues and most people will still not get a ticket. They will go simply to the fortunate or those who can afford to queue for whole days to be sure of being at the front of a queue.
By clamping down on resale sites and the crucial price signals they send out, Ticketmaster have ensured the market will work less efficiently. In this new climate, vendors can expect just as many complaints as before – only different ones.
Though the online vendor claims this was always their long-term plan, there are reasons to be skeptical. Given the timing of the decision, it seems far more likely to have been politically influenced – coming a month after the Irish government backed a bill banning the resale of tickets for more than face value, and with competition authorities eyeing up similar measures in the UK.
The principle established here – that nobody who has bought a ticket to an event can resell it to a willing purchaser for more than they paid for it – betrays astonishing economic illiteracy.
Consider the following questions. In what other market is this true – and what would be the effect of similar regulation in any other market? Imagine, for example, if you bought a house or car and were banned from selling it for more than you paid for it? Or suppose that people who buy products such as grain, or oil, or finished products of any kind were banned from selling them at a markup?
The result would be to make the market in these products extremely inefficient. Above all, it would cause misallocation of resources on a mass scale – meaning that valuable goods would not move through exchange to those who valued them most highly.
Campaigners against ticket resale claim that high prices result, in the first place, from so-called ‘Ticket Touts’ buying up many tickets at the asking price and then selling them on for a profit. This, too, is nonsense.
Firstly, they can only sell the tickets for more if there are buyers willing to pay that price. If there are, this tells us the original price was too low (as a result, the demand for the tickets was too high for the number available). Secondly, resellers cannot keep the price up or put it up. As soon as they sell the tickets the price they get will fall if they try to charge more than the market rate.
Imagine a situation in which no individual could buy more than one ticket – but they were able to resell them for whatever they could get. The price would immediately be bid up to a higher level, if the initial price was too low for the demand (this is also how dynamic pricing software of the kind used by airlines works).
What will be the result of these changes? Well, it certainly won’t be easier for people to obtain tickets to see popular stars like Ed Sheeran. The available tickets will still sell out in a matter of minutes – except now, if you miss out, you will not be able to buy one no matter how much you are prepared to pay.
Primary ticket issuers will have the added difficulty of guessing what the clearing price is for every event. If they set it too high there will be many unsold seats, if too low there will huge queues and most people will still not get a ticket. They will go simply to the fortunate or those who can afford to queue for whole days to be sure of being at the front of a queue.
By clamping down on resale sites and the crucial price signals they send out, Ticketmaster have ensured the market will work less efficiently. In this new climate, vendors can expect just as many complaints as before – only different ones.
2 thoughts on “Restricting ticket resale is economic illiteracy”
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i think this is confusing two issues. One is the statutory regulation of resale which is clearly wrong. The other is private entities deciding that resale at a profit should not available for specific events. There may be all sorts of reasons why promoters, artists and sports teams wish to give people who put a high value on money but a low value on time an opportunity to buy more tickets than might be possible if the tickets were only sold at market value. There are all sorts of ways this can be done (producers banning resale, requiring buyers to bring the credit cards with which tickets were bought, using moral pressure etc). But to argue that the market participants themselves should only have money values in the utility function is not good economics. The iea led to the banning of resale price maintenance and it was mistaken then.
I don’t understand why the government body insists on stirring in on this subject of ticket scalping. Perhaps it is the Big They’s madness of trying to control everything. Anyway, I have long thought that far from trying to control scalping like it was some kind of drug, we should have a Scalpers Auction right at the beginning. If tickets are worth $500.00 a scalper will probably pay $300-$400 at auction. These events might actually make some money and a fair price would easily be established from the information. Personally, I want no part of this the insane system currently used to sell tickets. If I could have someone promptly and politely deliver me a set of tickets at a competitive price I would go much more often.