Friday, March 20, 2009

Scalping and intermediation

The resale of tickets for concerts and sporting events, at higher prices than those at which they were initially made available, is often regarded as "scalping," a repugnant transaction that is illegal in some states. (See e.g. Greg Mankiw's post about resales of Jay Leno tickets...)

But the lines are getting less clear, as artists and sporting venues try to make use of the secondary market themselves, to benefit from the higher prices enabled by discriminatory pricing:
Concert Tickets Get Set Aside, Marked Up by Artists, Managers .

"Less than a minute after tickets for last August's Neil Diamond concerts at New York's Madison Square Garden went on sale, more than 100 seats were available for hundreds of dollars more than their normal face value on premium-ticket site The seller? Neil Diamond."

..."Secondary ticket sales are viewed by Ticketmaster, concert promoters and artists as one of the biggest -- yet thorniest -- sources for revenue gains. In 2006, Ticketmaster launched TicketExchange in response to pressure put on its profit margins by secondary-ticket sellers such as StubHub. But in doing so, it opened the company to criticism by ticket brokers, fans and politicians, who accuse the ticketing giant of profiteering and obfuscation.
Ticketmaster is moving to distance itself from some parts of the secondary ticketing market. It is in the process of hiring an investment bank to try to sell another resale service, TicketsNow, according to people familiar with the matter.
Virtually every major concert tour today involves some official tickets that are priced and sold as if they were offered for resale by fans or brokers, but that are set aside by the artists and promoters, according to a number of people involved in the sales."

One of the interesting things about this story is how Ticketmaster and the artists seek to put some distance between themselves and the secondary market. Luke Coffman (who you can try to hire next year), has a paper that seeks to understand this: Intermediation Reduces Punishment .

As part of his investigation into how people view economic transactions, he runs experiments that show that charging a high price through an intermediary may be seen as less blameworthy than charging a high price directly, even if going through an intermediary means that the ultimate price charged is higher than it would have been with a direct sale. And, he finds, this doesn't seem to result from confusion; apparently putting some distance between yourself and an act that may be regarded as blameworthy dilutes the blame, even in the eyes of observers who understand that you are doing it for that reason.

The "middleman" view of scalping gets some support from Trent Reznor of the band Nine Inch Nails (courtesy of Eric Crampton's blog Offsetting Behavior, for which HT to MR).

Luke will be talking about his work on intermediation, and related work on how people perceive the moral content of economic transactions, in our Experimental Economics class today.

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