Comment by jjmarr
2 years ago
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.