11/12/2013

Ticket Scalping

In one of our recent classes we discussed price discrimination and the topic of ticket scalping came up.  This was interesting because Professor Tufte said economist do not have a good answer on whether venues should or shouldn't allow this practice.
This past summer I was in San Diego with my wife. The main purpose was of our trip was to attend the San Diego Zoo on day 1 and Sea World on day 2. We were done at the zoo around 5:30 pm and decided to drive to Petco Park to watch the Padres play the Pirates where there was an abundance of tickets available. Our plan was to purchase $15 tickets for seats in right field but as we were walking from our car to the box office we found a ticket scalper and bought tickets from him. The tickets we purchased had a face value of $90 each and we bought 2 of them for $60 total. 
So what did Petco Park lose by my purchase of tickets from a third party? I purchased the $10 bottomless soda cup, $4 popcorn bucket, four $4 hotdogs, $25 dollar t-shirt for my wife, and a $30 hat for myself. Petco Park lost $30 on ticket sales and $30-$50 in additional purchases I would have made at the ball park had I not purchased $60 tickets from a third party.

Another example of third party ticket sales is from when I went to the Jimmy Buffet concert at MGM Grand in Las Vegas last month.  The concert was sold out and we had 2 extra tickets which we were able to resale.

What did MGM Grand and Jimmy Buffet lose? I would argue that MGM and Jimmy Buffet did not lose or gain on my resale of the tickets.  The venue had received their asking price for the 2 seats and therefore could not receive any additional income.


After these two experiences of third party ticket sales, the best answer I have is: it depends.  

8 comments:

Chad said...

I like the two examples given in this post. I have had similar experiences with ticket scalpers but I have also had experiences where I have purchased tickets from a scalper and ended up having worse seats than if I would have bought the tickets directly from the stadium. I agree with Mike's conclusion that it depends. My question is what does it depend on? What makes third party ticket sales a good thing and what makes it bad for venue hosting the event?

Mazer said...

I disagree with the statement: “I would argue that MGM and Jimmy Buffet did not lose or gain on my resale of the tickets. The venue had received their asking price for the 2 seats and therefore could not receive any additional income”. I would think that stadium personnel care about the number of people in attendance, for purposes of concession sales, but ultimately they care less about the number of bodies in the seats and more about the number of seats sold. More seats sold mean more income. By buying the tickets from the scalper, the stadium is selling two less seats, thus loosing additional income.

I would agree with the statement that they do not lose any additional income is true in the case of a sold-out event. In that case, every seat has already been sold; therefore it would even benefit the stadium to allow scalping because it would mean more people in the seats, thus boosting possible concession sales.

Although the stadium has already received its asking price for the scalper’s seats, by allowing you to purchase the tickets from the scalper the stadium is losing the sale of the additional tickets you would have purchased.

Su Jung Poe said...

While venues will generally sell tickets to customers at a set rate, they may practice third degree price discrimination by offering deals or coupons to certain groups. I think that this is a fair practice and the company will generally benefit from this. However, ticket scalpers take advantage of this and make money in the process.

In Mike's example where he described his experience at a Padres game, he said that his tickets had a face value of $90. The ticket scalper probably didn't pay $90 for the tickets and then sell them at $60, he must have acquired the tickets at a lower price than even $60 in order to have incentive to do the transaction.

I think that while Mike's example shed a positive light on ticket scalping, the customers are the ones at risk here. If the game that Mike attended were sold out and people really wanted to get in, the ticket scalpers could simply raise the price of the tickets if there is high demand for them. He might have ended up paying even more than $90 for the tickets if the game were a big deal. I don't think that this is really price discrimination but rather simply the forces of supply and demand.

Dave Tufte said...

Mike: 88/100 (economist instead of economists, and "we were able to resale").
Chad: 50/50
Mazer: 50/50
Su Jung Poe: 50/50

Oooooh, no, I didn't say we didn't know "whether venues should or shouldn't allow this practice." What I said is that we can't figure out why artists price their tickets low enough for scalping to be profitable.

The going answer to this is that artists allow scalping because demand for entry is more elastic than is demand for souvenirs sold inside. By letting scalpers do their thing, they get fans inside the venue to buy overpriced stuff.

Chad: economists would argue that it is inefficient for artists to try and control what ticket owners do with their tickets once they've bought them.

Mazer: how is the stadium losing on seats if either way Mike and his wife get in to the game?

I think Su Jung Poe raises a good point. Price discrimination is what an artist should be doing, and resale interferes with that. But, while price discrimination benefits the seller, it's still inefficient. So, to the extent that scalpers improve efficiency, it's a good thing for all of us.

MJ said...

I think that there are many valid points made in this blog thread. I agree with Su Jung Poe that ticket scalping (especially the last few days before the event takes place) is mostly reliant on supply and demand. Most sports teams use a variable pricing method which alters the face value ticket price for each game throughout the season depending on various factors: opponent, date/time, current season record, etc.

Ticket scalping is similar to this method because based on the consumer's desire to attend the event will alter the dollar value placed on obtaining a seat. I think this is more prominent in sporting events versus concerts or shows because the perceived value is much more elastic for sports than concerts. A fan of a particular musician will likely be willing to pay the same amount for a ticket regardless of whether they purchase the ticket six months in advance or the day of the event. Whereas, a fans willingness to purchase a ticket to a game could change within a matter of a few days.

Dave Tufte said...

MJ 50/50

I don't have anything to add MJ. I like your thinking, and I learned that many sports teams are moving to variable pricing (I didn't know that: that's what I get for living in Cedar).

Trey said...

I find this topic and the points made so far very interesting. I feel it's important to consider the online market for scalping tickets because it is a huge market. It is completely different than scalping tickets at the venue just before the event. Websites like stubhub.com, ticketsnow.com and even Ebay provide a forum for buying and selling tickets that I think has helped the consumer more than the seller. Allowing consumers the opportunity to shop prices a lot easier online than at the event makes the demand more elastic and therefore more difficult for scalpers. Sellers have to be very careful how they prices their tickets by evaluating the overall demand, purchase history for the event and how seats in the same area are being priced by other sellers. The online market typically permits the consumer the opportunity to look at the seating arrangement of the venue thus comparing the values given to different sections. This would circumvent the situation Chad ran into buying worse seats from a scalper than he could have bought from the venue. I also think the consumer doesn't feel the sense of urgency they might feel in the hours leading up to the event. Instead, you can take your time monitoring the price of tickets listed and sold online before making your purchase. I think it's really easy to be fooled by a scalper on the value of a ticket you are purchasing because as the consumer in that environment you often don't really understand where the equilibrium point is for the supply and demand.

One last point I would like to make about scalping tickets online is for the layperson who has an extra ticket(s). For this situation, these sites are a huge advantage making it very easy to sell your ticket and recover some, all or more than your costs by undercutting the market. You could get lucky waiting until the event hoping to find a desperate person willing to pay a lot for your ticket. Years ago I was in the position where I didn't want to lose money so I wouldn't drop my online price. I eventually went to the concert and couldn't sell my tickets there either and just gave them away.

Dave Tufte said...

Trey: 44/50 ("shop prices a lot easier online" doesn't make sense, and "price" not "prices").

I think Trey is right that this has helped consumers. Tickets for venues with limited seating are an obvious example of price discrimination. And the goal there is to convert some consumer surplus into producer surplus. These sites work because they mitigate that.