If 1000 people want to see a show in a theatre with 1000 seats, that would be an ideal market. But in reality you get 2000 people trying to buy tickets for that show. 1000 are the fans and 1000 are people trying to buy the tickets to flip them for a profit.
The artificial demand creates a market that benefits nobody except the scalpers. The fan loses by paying higher prices, and the artist loses (sometimes) by leaving money on the table. This is why Madonna and the Eagles are charging $750 for front row seats.
The artificial demand you mention is essentially speculation. The scalpers are betting that the actual price attendees are willing to pay is higher than the initial selling price, which leads them to buy the ticket. This system still requires players who ultimately purchase the tickets for the utility of seeing the show. If $100 tickets ultimately get sold for $2,000 to actual attendees, the original seller significantly underpriced their tickets. There was a full market of people willing to buy the tickets for $2,000 for the show. Scalpers didn't mess with this market or confuse demand. They made the market efficient. The fans who valued the show the most got the enjoyment utility of attending. This system primarily hurts the fans who couldn't afford the more expensive tickets. On the other hand, without a secondary market, the fans who valued the show the most are harmed.
The only way that scalpers can create artificial demand is if there are no attendees willing to pay the price scalpers want to charge. In that scenario, scalpers sell to other scalpers at higher and higher prices, and the last person (scalper) to buy loses. If the last scalper buys the ticket for $4,000 and there is no party willing to buy the ticket for at least that AND see the show, the scalper is left with two options - go to the show (which by definition for the scalper provides less utility than the ticket price warrants), or sell the ticket at a loss (or possibly for $0, if there are no buyers).
I think there is a good analogy to other forms of speculation, particularly in commodities. Speculators "drive up" the price of oil by buying and selling it for more and more, but as long as consumers are willing to pay for that oil, the price is justified, and the original sellers forfeited their potential profit.
Granted, oil and housing speculation can lead to bad things for the economy as a whole. Here I think the analogy fails, since tickets are inherently a temporary market with an expiration date. Without an expiration date you can have bubbles, and bubbles can burst.
I'm definitely not an econ expert (far from it). Scalpers may not be confusing demand. But aren't they're artificially constraining supply? There are a limited number of shows and seats available.
If I'm a scalper and I buy the last 100 seats (or rather, I have the last 100 seats not taken by someone who actually is going), I can now sell the tickets at a premium. If there are only 75 more fans that want to go, they are forced to come to me and the prices go up artificially. I can still profit without selling all the tickets. Without me the scalper, there would have been enough tickets to go around at face value.
Yes, the price is going up because people are willing to pay for it, but without the scalper it wouldn't have happened.
If a show has 1000 seats, and 900 fans buy the first 900, and never consider reselling at any price, then they are the ones constraining supply relative to an efficient market. (And there's nothing wrong with that, shrug.) The scalpers, by reselling tickets instead of just holding them and ignoring the market price, actually are increasing the amount of tickets available on the market, not lowering it.
Imagine if there were zero scalpers. Then it sells out and price goes to infinity. How can price go to infinity? Because supply is being constrained to zero because people refuse to consider reselling. Scalpers delay that some and keep the market more robust, while also making a profit from underpriced tickets.
And you can never ever sell a ticket to someone for more than the value of the show to them, so the buyers never lose.
All they are "losing" is the ability to get underpriced tickets (tickets for less than they are willing to pay) from the original seller who could have charged more (since he controlled all the tickets) but, for whatever reason, preferred to leave some money on the table for scalpers.
wow... you consider a market to be something which maximises all possible monies rather than something where you obtain something for use. No wonder this 'scalpers are helping the system' theme sounds crazy.
No, xenophanes is simply explaining how markets work. Markets are supposed to maximize utility, whether that be monies or laughter at a concert. If a price is too low for demand, any opening that allows middlemen to creep in, raise the price to demand levels, and take the difference, will be taken. If the resellers price too low, they'll just generate an opening for re-resellers.
The problem, for me, isn't with scalpers, it's with income and wealth distribution (which separates nominal demand from actual benefit to useful people), with over-regulation of commercial performance (limiting the number of venues through regulatory capture), and with the destruction of local community (since there are no local acts anymore, everyone chases the same small number of national and international ones.)
Of course Louie C.K. generates a massive demand - in a country of 300 million people, he's one of the 50 comedians that anybody has heard of because he makes it into the national media. When the average person can name a few comedians that live and work in their neighborhood, going to a Louie C.K. show will be considered a luxury good AND the price will go down.
Part of my response to xenophanes' comment is a visceral response to treating a 'robust market' as a target goal, rather than a journey to an outcome.
The cost of ticket 1001 to a 1000-ticket show is infinity, regardless of whether you have scalpers or not. Increasing the price of the last 100 tickets does not mean you have increased ticket supply, all it means is you have taken 100 tickets from earlier, creating an artificial scarcity, and sold them later. Those hundred buyers that 'don't lose' down the track do so at the expense of a hundred buyers that lost earlier.
xenophanes is making funny with numbers because he's comparing the price of ticket 1001 in the non-scalper system with the price of ticket 901 in the scalper system.
I don't think he/she is. There might be 20,000 people interested in tickets to the show at $55, but only 1000 will get one and 19,000 will be left out in the cold. If 100 of those tickets are purchased by scalpers, 19,000 will be left out in the cold. The difference in the two cases is that 100 of those tickets in the second case will go to the people willing to 'be the most useful' for them - and in an ideal society that seems to me like the fairest way of doing things.
The only problem I have with it is that due to general political market distortions, money is very cheap to a small number of people who do very little and have lots of leisure time, so the dollar commitment for a ticket price has little relation to either subjective or objective (ideal) utility.
As a performer, I'd have an interest in keeping the ticket prices low simply because I wouldn't want an audience filled with the kind of assholes who would pay $500 for a ticket to a two hour comedy show. If I really adored Louie C.K., was one of those assholes, and it took 11 minutes to get to the site to buy a ticket that sold out in 10, I'd hope that scalpers got a significant amount of those tickets.
Hell, even if I wasn't one of those assholes I'd hope for scalpers, because if they overestimated demand and priced too high, they might end up dumping tickets at the last minute and I might end up paying less than face value. Instead of not being able to get a ticket at any price, the tickets are handed out based on how much you're willing to commit to get them. If demand then raises the prices to $1000, I can still get a ticket if I love Louie C.K. more than I love keeping my apartment.
Because, really:
the number of people who lose = the number of people who would go to the show for free - 1000
Personally, I lose at face value, because the day I pay $50 for a concert is going to be the day a gallon of milk goes for $15. It doesn't mean that I don't like Louie C.K., it just means that I like 3 gallons of milk more. Everybody makes their own call, whether it's when the cost goes over $10, over $1000, or over $55 + F5ing a site for 6 hours.
In the short term, there are a fixed number of hard drives (and beach balls, and microwave ovens, ...). Why don't we have to worry about hard drive scalpers artificially constraining the supply?
It would be determined mostly by price, and this would just be another version of the supply/demand curve. If he sells the tickets at $20 each, then 100k will want to see his show. At $50 each, 10k people, and so on.
There is a much smaller quantity of seats that need to be acquired to scalp the market and push out competition. The spread is much higher if you know there is a relatively high demand that cannot be justifiably spent elsewhere.
Shows are much more constrained. It's the very specific "skilled labor" involved (only one person can produce a show in only one city, maybe two a night). Imagine if you needed a hard drive factory in each city and only one factory could run at a time.
I can't buy a show for Denver. I might not even be able to buy a show for Friday nights. That severely limits the pool of "supply" I can buy from. Louis might be in my city once a year for a few days if I'm lucky.
You're right: it's speculation. I should have used that term outright.
The problem I see is that it's speculation with a known outcome. If I buy gas or oil forward contracts, it's a play with non-zero risk. Iran might declare war or we might invent Mr Fusion tomorrow. So far so good.
But with a concert, let's be a bit more realistic. If the Rolling Stones decide to tour and play in your town this year you can be 100.00% sure the concert would sell out. If they quadrupled the dates in that town, they would still sell out. For a given set of acts that scalpers target, there is no possible way that there is a risk of scalpers holding expired tickets...unless they get greedy.
I think the terms "no possible way" and "100% sure" are inappropriate for an economic discussion. There's always the possibility of some event occurring.
What you're implying is that there is infinite demand for a Rolling Stones concert at any price. As far as I know, this is a concept on the extreme edge of economic theory. Maybe there could be infinite demand for necessities like oxygen should we be forced to make a decision, but for a concert the notion is absurd. If the tickets were priced at $1,000,000 per seat, I doubt you would sell out.
The bottom line is that there IS an appropriate price which will maximize consumer and producer surplus utility (the positive difference between what you were willing to buy/sell the goods for and what you actually bought/sold the goods for), and scalpers/secondary markets will exist when the principal seller misprices the tickets. Without the secondary markets, that ideal price will probably not be reached, and there will be a shortage or surplus of the goods.
How is there artificial demand? The scalpers aren't buying tickets for fun - there has to be someone to flip them TO. These people are fans and they create the demand, as stated in the grandparent.
Edit: a common "rebuttal" in this thread (see diek, potch, drivingmenuts) seems to be that there is an assumption of correct market price being the aim. That isn't the assumption or the point. The point is that excess demand creates the problem. There are several approaches to this (first come first served, lottery, aftermarket) but getting rid of scalpers doesn't solve the fundamental problem. The only thing they (may) be doing wrong is going against the wishes of the artist (if they prefer to use another method). It's not clear that e.g lottery is better than finding the true price (or vice versa).
1-This is inherently a class-based argument. It assumes that someone with more money than you isn't a 'real fan' and that his true fans are the squeezed middle class (or whatever class-bracket you happen to be in).
2-The world doesn't owe you anything. Thinking this is unfair because you can't afford tickets to a stand-up comedy show is the epitome of a First-World problem.
edit: this isn't exactly a reply to sambe's comment. I was taking his 'Correct Market Pricing' comment that was addressed at the rebuttals and adding to it.
Anyone that has tried to deal with buying tickets (either in today's system or even back in the old days where you had to stand in line) knows that there are people with large sums of cash willing to pay people to stand in line or bombard ticketmaster.com with requests to land tickets for a show they have no intention of seeing. They resell those tickets immediately for a profit to the people that really wanted to see the show. Go look at StubHub.com 30 minutes after a popular rock concert goes on sale. Did every single one of those sellers have a sick grandmother pop up?
No, the world doesn't owe anyone anything, and this isn't a white whine. It's an example of how people with more time and resources than you can jump ahead of you in line and, as a result either deny you an experience or make you pay more out of pocket for it...all in the name of profit.
"more time and resources than you can jump ahead of you in line and, as a result either deny you an experience or make you pay more out of pocket for it."
Isn't that the way the world works? We aren't talking about access to food, education, or healthcare here. We're talking about entertainment. Is there a particular reason why someone with more time or money shouldn't have an edge and be able to spend their money to do something someone with less money can't do?
If you fly enough you also can get upgraded to first class cabin. Is there something not fair about that as well?
> Is there a particular reason why someone with more time or money shouldn't have an edge and be able to spend their money to do something someone with less money can't do?
Scalping is asshole behavior. It is that simple. Don't sugarcoat it in talk of 'smoothing' markets. The scalpers do not add any value to the transaction. They merely inflate the price.
I'm so sick of HN over-intellectualizing topics in order to avoid the difficult discussions of ethics. I'm guessing they're avoided because (gasp) it isn't objective. The horror!
The ability to buy a ticket for a popular show at short notice on (or close to) the day of the show has real value to me, and is a service I'm occasionally willing to pay for.
For example last time I was in London I just happened to see that a band I liked was playing that evening. Having no other plans I wandered up to the venue a couple of hours before opening and a kind gentleman outside was happy to sell me a ticket. Sure I paid roughly double the value printed on the ticket, but to me it was worth it for the service and convenience.
Now I'm not saying that scalping is the best solution to this problem, but there is definitely a market here (for tickets on short notice in my case) and money to be made and value to be added.
How does being upgraded to the first-class cabin deprive a poorer person of flying?
And no, it's not a blanket statement of the way the world works. There's plenty of things like copyright that prevent a gorilla just coming along and taking your toys for themselves.
Performers now know that they lose good will when a fan has to pay a scalper to see them. Louis C.K. is earning tons of good will by doing this, and the only person who loses out is the scalper. Wealthier fans have always been able to work the system to get extra tickets, back stage access, etc.
Your hyperbole ("the minute") isn't aiding in understanding reality. Lots of artists have enough good will built up in their fan-base that they can produce a few bombs and still retain enough fans to reboot their act back to something that the fans like.
Perhaps "the minute" was a bit much in trying to prove my point.
First, I think comedians are a little different then other types of artists who have a little more latitude in their work. I'm speaking specifically about the buzz that surrounds this particular artist right now who is very funny. And what I'm saying is that if he stops being funny, in general or not as funny, the goodwill that he built up won't matter in terms of bringing a significant number of people to his shows.
And if he becomes funny again people will want to attend his shows regardless of something like what he is doing. I don't believe the fact that (this type of) goodwill would make a big difference in how quickly the audience returns.
And in any case the reason any artists matters at all is because they provide entertainment that people like. That is their product. The "good will" part isn't what got them to where they are today and won't keep them there if they fail to deliver.
The old Howard Stern (haven't listened to him since he was on non satellite was quite the asshole in many cases. Despite that he had a big following even from people who thought he was a dick. Because he provided entertainment that people like they overlooked undesirable things about him.
How is your second point at all relevant? No one is talking about being owed anything. This situation isn't the consumers pushing against scalpers, it is the performer/artist himself.
You seem to be against Louis C.K. having the freedom to sell his product how and at the price he chooses (for whatever reasons he thinks are of merit). Why?
An odd comment - I didn't say either of these things.
However, other people are saying them and I'm with you - both are fallacies. Particularly on the first, I'd suggest to "real fans" that they consider whether they prefer paying more than face value or not going at all (just in terms of their utility, not as a point of principle). If the latter, then consider the option of refusing the higher price - same result, you don't go! There are no easy solutions.
The perceived issue - I guess - is when a very high percentage of tickets become resold and you don't agree with this method. I'd say your very small chance of getting a face value ticket is still representative of a world without scalpers as they are, as always, acting as a proxy for real demand, which would otherwise be competing with you for face value tickets directly.
It is absolutely a class-based argument, and not the fault of scalping, but the class-based argument is a reasonable argument. To the extent that an uneven wealth distribution is based on insider networks, regulatory capture, and rent-seeking, nominal demand is pushed higher than actual utility.
Class-based argument? Your prejudice is showing. The 'true fan' part is about following the goings-on of the performer and being aware that there's a show coming up, and trying to get tickets ASAP instead of two days before the event. Please stop trying to make absolutely everything about money.
This is the artist himself saying that he'd rather have true fans in the seats at a reasonable price, rather than have the tickets snapped up by the asshole with the biggest wallet (not sorry for editorializing, that's the politest version of my view of scalpers).
The add-on effect he's looking for is fan retention over time. If 500 people bought from a scalper at some much higher price, there's a small chance that they will become disgruntled and stop being fans. In the long term, he could lose that business.
But if he himself levels out the market, the fans have less to lose. Sure, the artist takes a hit, but that's on him. He can always do something different next time if he's dissatisfied with his revenue.
Remember that this is a guy who made so much money the last time, that he was somewhat nervous. I don't think he's thinking about it the same way you are.
As for "not doing anyone any favors": way I see it, he's doing his fans a favor by keeping the ticket prices affordable.
So true fans are poor? What does having a fatter wallet have to do with your taste in comedy?
Also, fans don't work the way you think they do. If I like Louis CK, I like Louis CK. If he chooses to charge $500 for a ticket, I will just watch him on TV. It won't cause me to resent him.
In a perfect market, if enough people feel the same way, the price will drop down into the range that I am comfortable paying. If, on the other hand, he has so many fans that some are willing to pay exorbitant amounts to see him live, I will be forced to watch him on TV.
If he wants to give everyone (rich and poor) the chance to experience his set live, he needs to increase supply by touring more.
No? True fans are alone, and true fans are not necessarily the earliest at the gate. If scalpers can grab half the tickets before the show's sold out by buying in bulk, they're going to make a lot of money. Because now they control the product.
> he needs to increase supply by touring more.
He's booked 67 dates, he's only one guy, touring more? He'll need to put his million of sales in cloning if he wants to do that.
But he's at least found a way to keep control on prices and scalping and give everybody equal opportunity.
And you're sticking up for the fair-weather fans who aren't willing to take out a second mortgage on their homes.
Also, "true fans are not necessarily the earliest at the gate" is not an example of No True Scotsman, it's an example of Some True Scotsmen, the exact opposite.
I do say it as a bad thing. In my example, the 1000 fans and the artist would have been perfectly happy with the arrangement. Of course this is never the case.
So the scalpers are profiting from the mismatch in supply and demand and making the show less accessible to the fans. From a scalper POV, that's capitalism. God bless America. From the fans's POV, it just sucks.
And I could swap Louis CK for oil, and scalpers for Goldman Sachs, you know. Same thing IMO.
And the artist's POV as well, his fans are now poorer and there's no value into it: they don't enjoy it more, they don't get more merch, they don't keep their money to see the next show, they don't get to buy a nice dinner for their SO, etc...
That's an interesting angle. Internet piracy of content was supposed to be okay because the artist should be able to profit from concerts and related merchandise. But it seems that isn't entirely possible either.
How is that 'smoothing' the market? CK Louis seems to have smoothed it flat with $45 for all tickets.
If the scalpers didn't exist, the eventual ticket-holders would still be able to purchase from the original vendor. It's not like scalpers make tickets magically appear.
> If the scalpers didn't exist, the eventual ticket-holders would still be able to purchase from the original vendor.
A lot of them wouldn't, though. If the scalpers sell the tickets for, say, $500, then the people willing to pay $500 get tickets pretty reliably. If the scalpers didn't exist, those people would have to take a roll of the dice along with the many, many more people who are willing to pay $45. A lot of them wouldn't be able to see the show.
I didn't mean the same people. The same number of people would see the show, and people generally believe in a first-come-first-served moral system - spend a night in an busy ER department and see how the general public like the idea of 'triage'.
Really, my point is more that those tickets were going to sell anyway, and all the scalpers are doing is reducing the potential audience for those tickets. I don't see how this specific market is 'smoothed' by this practise.
If 1000 people want to see a show in a theatre with 1000 seats, that would be an ideal market. But in reality you get 2000 people trying to buy tickets for that show. 1000 are the fans and 1000 are people trying to buy the tickets to flip them for a profit.
The artificial demand creates a market that benefits nobody except the scalpers. The fan loses by paying higher prices, and the artist loses (sometimes) by leaving money on the table. This is why Madonna and the Eagles are charging $750 for front row seats.