9/23/2007

Ticket Scalping Law in Missouri

The state of Missouri is trying to get a bill passed to legalize the scalping of sporting event tickets. Ticket scalping is a type of free market where suppliers, ticket scalpers, that have extra supply, tickets, are trying to sell to buyers who have a demand for the tickets that these suppliers have. The buyer and seller negotiate on the price of each ticket purchased. This results in each transaction that takes place maximizing the amount of buyer and supplier surplus that occurs. Therefore, all that Missouri is really trying to do is to allow the free market to rein without regulation.

11 comments:

Dr. Tufte said...

-1 on Sophie for a homophone error.

It's always nice to see (economic) reality getting incorporated into the law.

There's 4 ways to allocate things: prices, first come first served, lotteries, and command-and-control. When there is a breakdown in any of the last three, you tend to see prices used by people to make adjustments.

The traditional idea that scalping is wrong relies on the notion that command-and-control extends beyond the initial allocation of the ticket to a particular person. This is like an auto dealership forbidding you to ever resell the car you buy there: it's just silly.

Hailey said...

I agree that ticket scalping should be allowed. I know that there are events that I would pay extra money for, but I cannot get tickets because they were sold to those who paid a lower price. The comment by Dr. Tufte was interesting, because I had never heard of the command-and-control method for allocating prices. It makes sense, but I think that it is ridiculous that someone cannot sell their ticket at a higher price after they have purchased it. As long as someone is willing to pay for it, it should be allowed.

Dr. Tufte said...

That discussion is common in ManEc texts, but does not appear in ours.

In that view, firms are institutions that (primarily) use command-and-control on the inside, and the price mechanism on the outside. Then issues of horizontal and vertical integration (and deintegration) revolve on which allocation mechanism is more efficient for a particular task.

Hayden said...

I agree with Hailey that legalizing scalping is a good idea. Many scalpers are willing to do it illegally because it doesn't seem like they are caught very often, so they must believe that the profits of scalping tickets are worth the risks/costs involved with being caught.

If scalping is legalized, it would possibly reduce the price of buying scalped tickets because more people would be willing to enter the market of scalping tickets since the costs involved of entering this market would be reduced by legalization of scalping. With an increase in competition usually comes a decrease in prices.

Caden said...

I can understand why the businesses who control the tickets from the beginning would want scalping to be illegal, but I am always for open market transactions. Often times you can find tickets from scalpers at lower prices. I have been the recipient of those tickets before and have had a great deal of consumer surplus when they have been below face value.

At the same time for big ticket events like the super bowl, the price that the scalpers charge is often much higher than the face value.

Whether or not Missouri makes it legal or not may have some effect on the market, but there are already some legal "scalping" websites like stub hub and even ebay that will allow sellers around the law.

Dominic said...

I think that scalping tickets is a fine idea. Once you have bought something you should be allowed to resale it for as much as you can. The problem lies in the original purchase of the tickets. What if scalping was legalized and I bought all of the super bowl tickets far in advance before anyone else could? Even more interesting would be if I managed a group of people that bought all of the tickets to certain events. Now I am a monopoly and can increase the price to each person’s reservation price. I would make a killing. This sort of behavior must be regulated beginning with the original sale of the ticket.

Dr. Tufte said...

-1 on Dominic for a spelling error.

The original seller usually already has a monopoly, so appending another layer of monopoly on top of that won't change much.

William said...

Dr. Tufte,
One problem that I see is that many scalpers make copies of tickets and end up selling you a fake ticket. This could potentially hurt MO because people may take their complaints up to them or sue them for allowing the scalpers to sell tickets. Scalpers do in fact help to bring more of a free market, but as you do this you allow for some people to take advantage of others. But, I guess this is the risk that you take on for buying a ticket from a scalper.

carter said...

Dr. Tufte said there's 4 ways to allocate things: prices, first come first served, lotteries, and command-and-control. Ticket scalping is pure economics.

Dr. Tufte said...

-1 on Carter for a comment that doesn't add anything to the discussion.

Anonymous said...

scalping tickets for higher prices is wrong and unfair...
if it were legal to scalp, people (myself) would just go buy up all of the tickets and sell them at a higher price...
if you are the only one with all of the tickets you could make a fortune...
scalpers suck