Comment by jjmarr
2 years ago
Buying something at a low price and selling it at a high price is arbitrage 101 and is free money.
The "true solution" is to sell tickets at their actual market price instead of pretending that the face value of concert tickets isn't increasing due to a larger population and greater demand.
People will scream (including in this thread) that it’s “unfair” that ‘only the wealthy can afford them then’ but their beef is with scarcity and thus with reality. It’s always “unfair” to the 10,001st person who wants to attend the concert with 10,000 capacity. Today it’s a weird lottery with 6 different fan and credit-cardmember presales, which each sell out immediately, and the “backstop” at the end which is the ability to buy expensive scalped tickets.
There are finite tickets but unbounded demand. A lottery means you can slightly adjust the distribution of poor vs rich, but in practice today it still advantages those comfortable enough to sit around refreshing their computers at the right moment, instead of working. And lots of opportunists will snap up those tickets you are hoping poor people will get, to sell them to the wealthy.
In my opinion for in-demand shows it should just be a Dutch auction (all of the highest 10,000 bids win, awarded at some fixed cutoff date before the event). If not enough bids are received, the concert isn’t sold out, so then the rest go on sale for the lowest bid.
A dutch auction is really hard because different tickets have different prices, different people have different requirements about where they want to sit (a committed disabled fan may be willing to pay any price, but they can't do standing only) and there are many different price tiers.
A better idea is an airline-style dynamic pricing system that considers different variables, current demand, projected demand, type of seat etc. If it looks like the show is about to begin and there are still lots of tickets left unsold, be like Ryanair and sell them at a massive discount. If there are more people on your page than there are seats available, make the price go up until that changes.
The simplest way of implementing dynamic pricing is a resale market, where the price of tickets changes based on supply and demand.
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> The "true solution" is to sell tickets at their actual market price
That is *a* solution but it isn't *the* solution. The fact that many smart people are not choosing that solution is an indicator that there are some factors to the problem that you aren't considering.
> Buying something at a low price and selling it at a high price is arbitrage 101 and is free money.
A bit of a nit pick, but this isn't "free money" unless you have a guarantee that someone will actually buy at the higher price. You could buy low, be unable to sell, and end up eating the "buy low" cost.
> sell tickets at their actual market price
How do you know what their actual market price is? You have to open it up to a market, where supply/demand get to play out.
IIRC some ticketing company tried doing something to this effect by scaling prices in realtime based on how many people were also trying to buy. I believe it was widely criticized as unfair/exploitive.
So you're back to square one then, where you have to set some price.
I mean, it may very well have been criticized, but how is it any less fair than the alternative? As for being exploitative, that's kind of the point. The company figures for most shows it's leaving money on the table for scalpers to take. The other side of it is that if a show bombs the ticket prices can be reduced to encourage people to come.
To be honest, it seems overall a better solution.
It's interesting how the real problem here is that our economic system has no way to sell a product at what the seller will bear, only what the buyer will bear.
I think this is a fascinating feature, a lot of artists would be more than happy to make $X for a show so that their fans can come see them. The problem ends up that a free market has no mechanism for that, the artist can sell the tickets such that they end up with $X but then you get things like scalpers who don't want to see the show but do want money and act like artificial demand. They know that regardless of what the seller wants there are buyers that will pay $X+N and want to capture that $N.
The scalper provides no value to the market, but they get $N, which seems like a market failure to me. The fans lose $N, the artist still only gets $X and they also get reputation damage because fans are upset that things cost $X+N.
And that's just the end of it. The artist literally can not perform for their fans at a venue for $X even if that's what they want, there's just no mechanism in the free market to make that function correctly. I find market failures like this fascinating because it really shows the limits of how "free" markets operate. The only person that isn't free to do what they'd like is the producer of the good being sold, they literally can't sell it for less than the market will bear.
And I suppose this plays out for every part of the market, if I can produce apples and make a profit for $1 a bushel and that's plenty of money for me, I don't want any more, tough shit. Arbitrage will make sure that people pay more for those apples. If people are willing to pay $5 a bushel then someone will snap up my cheap apples, mark them up and make a bunch of money for doing nothing. Even if I were willing to do all the distribution myself, if the person conducting arbitrage adds no value to the system (the common argument being that they deserve the money for finding cheap apples and connecting people that demand apples with a supply of apples), it just can't happen. The incentive to make that free money means everyone loses, I don't get to give people cheap apples, people don't get to enjoy cheap apples, everyone is worse off except for the person doing arbitrage.
The scalper provides no value to the market
The scalper allows the devoted fan who is gladly willing to pay $X+N to actually get a ticket rather than having to wake up at 6am and repeatedly refresh the site and probably still not get one.
I find market failures like this fascinating because it really shows the limits of how "free" markets operate.
How would central planning handle this better? There are more people who want to buy a ticket at $X than there are seats available; lots of people are going to be unhappy regardless of how they get distributed.
A devoted fan will have no issue to wake up a 6am and try to buy a ticket. They'll have more chance to get one if they don't have to compete with scalpers. Half the tickets could be sold as first arrived, first served, and half as a lottery system. The ratio might be adjusted.
If we agree that scalpers are a problem, we can make it illegal to resell ticket over the original price. Enforcement is always a problem, so to help with that it could be required to have an ID matching the ticket name and resell can only be performed on official platform.
To grantee having a ticket with this system, a wealthy or connected devoted fan can have private arrangement with the artist manager or event organizer to get tickets.
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Well just to be clear, I didn’t say central planning would solve this problem. A careful reading of my post would show a distinct lack of the term “central planning”
You can be interested in market failures without proposing an alternative. Complex systems are fascinating and their boundaries and failure conditions are fascinating. That’s all I’m talking about.
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People don't understand that the free market system is essentially a law of physics. You saying that a producer/seller of a limited good (in this case, space in a concert venue) cannot choose their own price is true, like it's also true that a person can't decide whether gravity pulls them down or not. You explained it pretty well yourself, the effect of supply and demand is unavoidable
I wonder though does it have to be limited. Like imagine I could make enough apples to fully satisfy the market demand for apples and I’m also willing to sell to anyone.
I want to sell those apples for $1 each. There’s plenty of apples to satisfy the demand. But let’s say that the market would bear a higher price, people would love to buy apples for $1 but due to a love of apples would be willing to pay up to $5.
In that scenario, the arbitrage opportunity still exists. Apple scalpers knowing that people would be willing to pay up to $5 would want to buy up lots of cheap apples and make the $4 profit that I’m leaving on the table for themselves.
And there’s just nothing we can do about it. I think we’d say that when the equilibrium price of $5 is met that the market is efficient but it’s a market where the producer of the good can fully satisfy the demand of the market for $X and yet the consumers have to pay $5X and this arbitragers get $4X.
It’s just interesting is all.
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If you have 10,000 people willing to pay $X to see a concert, but you only have 5000 seats to sell at $X, not everyone is going to get a ticket.
Our economic system (arbitrage!) increases the price of the apple by $N until only one person is willing to buy that apple at $X+N.
If you make arbitrage illegal and implement a price ceiling at $X, one of two things will happen. If $N is greater than the cost of breaking the rules, people will start a black market to sell at $X+N (like in many communist countries). As mentioned in the article, this is already occurring with Ticketmaster because they take such a large tax on tickets; arbitrageurs are realizing they can avoid Ticketmaster's system by just sending around PDFs.
If $N is less than the cost of breaking the rules (Ticketmaster benefits from $N>$X), there will be shortages of seats because not everyone willing to pay $X for a seat can get one.
The market system works great when people who derive the most value from tickets are the ones who pay the most money. This works even better with arbitrage because people can just pay what they value the ticket at.
The market failure here is caused by wealth inequality, because there are people with unfathomable amounts of money who will pay tens of thousands of dollars to see a musician they sort of like.
Personally, I like how box seats deal with the problem. They have a high level of luxury that costs little to implement compared to price + is very scalable (you can stack boxes directly on top of each other and you're paying more to sit farther away!), and that's helping soak up a lot of demand.
Thanks for the thoughts they are also interesting.
Sorry I saw your comment after I wrote this reply to someone else, I’d be interested to hear your take on this hypothetical situation too if you don’t mind. https://news.ycombinator.com/item?id=40911779
I agree with you though about the idea that the market works well when those that receive the most value spend the most money. While we have very high rates of wealth inequality, which also seems to be something of an emergent property of this system, once you have even medium amounts of inequality the system becomes interesting. I think expanding on your thoughts it comes down to the relative value of money being different for different people. If I have $100 then $10 is a LOT of money, it’s 10% of all my money. If I have $1000 then $10 is probably not a lot of money to me, not trivial but it’s only 1%.
Now this is an order of magnitude but if you asked someone if a system where the wealthy had 10x as much money as the poor they’d probably say that the inequality wasn’t so bad. But even in that case the guy with $1000 would probably be willing to spend $11 on some good that the other guy wants maybe infinitely more, just because that guy can’t really afford it.
It’s a fascinating way of looking at things I hadn’t quite ever thought about in terms of relative value of money itself. I don’t have any real point I’m making here, just thanks for contributing I found your reply interesting and it made me think.
IOW the true solution to scamming is to raise prices so high that only the extremely wealthy can afford them, regardless of how accessible the actual concert/act/group/promoter wants the show to be.
The "real" solution here would be for Ticketmaster (or whoever) to actually make a ticket non-transferrable somehow, and then allow for tickets to be transferred directly through the original website for at most the original ticket price, and refund me the money.
For example, if I have a $200 ticket and I can't make it and want to sell it, I can post up a link to the original ticket seller's website (in this case Ticketmaster) where someone else can go buy it, and, if they do, I get a refund of the amount they paid. I can say how much I'm willing to accept (full price, $150, whatever) and someone can go buy "my" ticket, potentially at a loss if I'm willing to accept it. Ticketmaster can make money on these tickets by charging a non-refundable processing fee or whatever to everyone (the original buyer and any subsequent re-buyers). They make a tidy profit, everyone gets what they want.
The only complications are
1. making the tickets non-transferrable but also work offline is a difficult technology problem 2. Ticketmaster is an unregulated monopoly and thus has no incentive to behave in the best interests of the market or its customers when they could rake in millions more by screwing everyone except the scalpers
Can’t someone hack your system by selling access to the link you mentioned for $500? Thus getting you the refund Ticketmaster knows about, and the private payment from the desperate buyer. Also, credit card processing fees used to be refunded when you refunded a transaction, but now I think some processors have now decided to start keeping the fees, because why not. Another 3% margin to apply at each sale (though that can be included in the transfer fee you suggest)
>Can’t someone hack your system by selling access to the link you mentioned for $500?
Not if they index the resales on their website and make them searchable.
People could still perform arbitrage by snapping up any resales significantly under the original price and reselling them at the original price, but at that point they're not making that much money and people are paying less than the original price, so the impact is just that you can't get a discounted resale. Which still sucks, but it sucks a lot less.
As far as I understand, this can't be done due to PR.
"evil scalpers are exploiting this poor artist by charging outrageous prices and preventing many fans from going" is a far better look than "evil artist is exploiting their poor fans by charging outrageous prices and preventing many fans from going."
To prevent scalping, you'd need a massive price increase, and very few artists are willing to be the first to do this.
The market sets a clearing price for the ticket as commodity (i.e. for a single event). However, the iterated game that is the spectator-performer relationship, the seller may _strongly_ prefer yielding some of their benefit to the buyer in exchange for long term EV, positive PR, or just plain old goodwill.
The problem is maintaining a mutually-beneficial but economically suboptimal equilibria.
The reason they don't do that is to have an organic fan base of poor people who drive up the prices for the rich people. If you eliminate the poor people, the rich people aren't going to take the band forward. They'll move on to whatever the next shiny thing is. You need a hardcore fan base of poor people to support and grow your valuation.
Buying a single-use item at any price and then selling it on at any price to multiple people is fraud.
Fiddling with the prices does absolutely nothing to fix that problem, because it isn’t a problem with price, but a problem with developing an unduplicatable token.
Ticketmaster is evil, and most resellers are fine, but some are evil and that’s a problem this at least attempts to solve.
It's only free money if there's no risk, and if there's no transaction cost to acquiring at the lower price. If there's no risk in buying something low and attempting to sell it high, then that thing is mispriced.