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Wednesday, August 1, 2007

Who will benefit from legal ticket scalping?

Starting today, ticket scalping is legal in Minnesota. Reselling tickets to ballgames, concerts and other events for more than face value, once a misdemeanor, is now on the up and up. This is good news and bad news.

It's good news for companies like Ticket King, which today opened a ticket outlet two blocks from the Metrodome after closing its longtime Hudson, Wis., location in response to the new law. Similar companies are sure to follow suit. Ticket brokers have long taken advantage of having pockets deep enough to allow them to buy up blocs of tickets, and being able to absorb the cost of "eating" the tickets that don’t sell.

It’s mixed news for the street-corner scalpers, the guys near the Dome with the signs reading "I Need Tickets" (need, in case it hadn’t dawned on you before, means am selling). While they no longer risk arrest for plying their trade, their revenues will be undercut by the presence of Ticket King.

It might be bad news for consumers. If the street-corner guys are driven away by Ticket King, bargain-priced tickets might be a thing of the past. Before, if a concertgoer bided his time until the Target Center headliner had taken the stage, he could get a ticket for less than face value from a scalper who just wanted to dump his remaining stock before it became worthless. Odds are, no such bargains are in store from Ticket King and their ilk.

1 comment:

Anonymous said...

This analysis makes little economic sense for four reasons.

First, tickets sold by scalpers are discounted, in part, because there is a risk that the ticket might not be valid. This 'discount' is illusory because, on average, the market price (assuming a somewhat efficient market) reflects the risk the buyer takes that the ticket is not honored.

Second, the ticket king will discount--or not--based on the market, the exact same way the black-market scalper does. Ticket king won't eat a slew of tickets to undesirable shows; it will sell those at a discount. Just as a scalper only deep tickets that don't sell, so will ticket king if it wants to extract the maximum value from the tickets. Rational actors will extract value even if it doesn't recoup their costs as long as the alternative is to waste the asset. Much like airfare, the market will set the price and the ticket king will mark up valuable tickets and discount those that are not selling at the last minute.

Third, and most importantly, efficient markets create optimal value for both buyer and seller. While some tickets may be more or less, the overall efficiency of the market means lower prices for everybody. This is the lesson of the last 40 years of America's capital markets and literally all credible economists.

Fourth, the state can now tax transactions and make more money in a relatively painless way.

As a final thought, waiting on line or paying more are both ways to allocate scarce resources (like tickets to a Stones concert). If the aftermarket increases prices, a rational stadium or event would correspondingly raise their prices to market price to extract the maximum value from the market. I'm sorry to say, but that's an efficient result. If the stadium wants to allocate tickets in a charitable way, it can find a way to hand tickets to orphans.

The law and economics school of thought is an important development in legal thinking; you should look into it.