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15 Cards in this Set
- Front
- Back
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Why does the secondary market of ticket resale exist?
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(1) demand changes over time
(2) the price in the primary market is too low |
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Give 4 reasons as to why the primary market undercharges.
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(1) risk
(2) social externality of a full house (3) audience for live performance has a preference for "fairness" in pricing (4) constant price is necessary to attract loyal fans |
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Who is included in the secondary market?
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brokers and scalpers
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What are brokers?
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Brokers are formal businesses.
--they hire many buyers to purchase tickets since most ticketing agencies have limitations on the number of tickets sold on each sale --preventing arbitrage is impossible |
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Who are scalpers?
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People are acquire tickets the same way as brokers, but usually buy and sell outside of the venue just before the event because this is when demand is at its peak
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Since there are no federal restrictions, what are some highlights of the state restrictions on ticket resale?
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(1) Roughly one-third of all states prohibit resale or resale above face value
(2) seven regulate resale (i.e. requiring a broker license)--MA is one of those (3) four allow local municipalities to determine their own resale restrictions HOWEVER: --enforcement is sporadic --w/o a federal law, a ticket for an event in a prohibited state can still be bought or sold in a non-prohibited state |
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What are two types of consumers of tickets according to Courty?
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(1) diehard fans who plan in advance
(2) busy professionals who cannot plan in advance |
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How do they differ in their valuation and pricing?
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Diehards value the concert at v and professinals value it at V where V>v
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Why do professionals who have the highest valuation not buy in advance?
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Because there is a high chance they may not attend!
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When is the only equilibrium met with ticket prices and the demand for tickets?
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Diehards buy tickets at price=p0
Professionals buy tix at price=p1 So the only equilibrium is: p0=v p1=V ***both means that they have captured all the consumer surplus for both groups |
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Why is it not profitable to charge at p0>v?
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Because the diehards outnumber the professionals.
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What price is profit maximizing for a promoter?
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They should sell at a price that creates a secondary market because it is not possible for promoters to capture secondary market profits.
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Without brokers, what would happen to the market of ticket sale?
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Brokers act as competition for promoters. Without brokers, promoters would have monopoly power over the secondary market and likely raise prices.
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What did Alan Krueger discover at the Springsteen concert?
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--20-25% of the concert goers bought from the secondary market at an average price of $280
--there were far more upper deck seats than premium seats on the 2ndary market --while most 2ndary tix were bought after primary tix, the price did not rise as the concert approached |
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What does Krueger estimate?
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He estimates that the promoter would have made $4million more in revenue if the primary price was $280
---however, concert goers value fairness....so is that really feasible? |
