Ticket scalping, the practice of purchasing then reselling the just-purchased tickets at an inflated price, has been a discussion filled with controversy. Many consider this practice to be immoral and inefficient – taking advantage of loyal fans while selling tickets to the wealthy elite. However, the reality is that ticket scalping not only increases efficiency, but also equity. By enacting regulations against scalping, the drawbacks of this practice are pronounced while its benefits are discarded. Instead, we should learn from the scalpers and incorporate the effectual parts of ticket scalping into the ticketing process.
Let me first expound on some of the benefits of ticket scalping, which we could use to improve the current ticket market. The biggest utility of scalping is its ability to increase allocative efficiency. Put simply, it puts tickets in the hands of people who value said tickets the most. For example:
A popular rock singer, John, performs where there are 1000 fans willing to buy tickets to his concert. However, there are only 100 tickets (perhaps due to the size of the venue), each being sold for $100. Bob and Alice are both trying to purchase tickets. Bob is a big fan of John; he attends all John’s concerts and always anticipates his new releases with great zeal. On the other hand, Alice, although enjoying rock occasionally, prefers classical. Thus, due to their differing tastes, they value a ticket to John’s concert differently. Bob values it at $500, while Alice only $200. Later, both Bob and Alice rush to purchase their tickets. In the end, the tickets are randomly distributed among fans as a result of the highly competitive online ticketing process combined with the overwhelming demand, where ten people are competing for one ticket. Here, both Bob and Alice would have an equally slim chance of getting a ticket, despite the fact that Bob values tickets much more than Alice.
Though this may not seem like a disparaging scenario, let us see what might occur when we introduce ticket scalping:
In this scenario, everything remains the same, except the moment the tickets go on sale, they are all immediately snatched up by the ticket scalpers (this is unlikely to occur in real life; however, it serves to strengthen the example). The tickets are then resold by the various ticket scalpers at a higher price, decided by competition between the various scalpers. Perhaps the new price is around $450. With the new price in place, Alice certainly would not purchase the tickets anymore, increasing the chance for Bob (whose self-assigned value, unlike Alice, is greater than $450) to purchase a ticket.
In this model, where scalping exists, tickets travel from fans who value the concert less to those who value it more. Better yet, because raising the price reduced demand, fans would be able to purchase tickets long after tickets were sold out on the primary market as a result of scalpers. If the ticket still has not been sold as the event draws near, their price will eventually be lowered by scalpers, even below the original price, something that the artist would not even consider for the risk of compromising their reputation.
Ticket scalping also has benefits for the ticket producer. In a scenario where a fan is uncertain about whether they would be able to attend a concert, they would purchase the tickets anyway, knowing that they would be able to resell them for a profit if they are unable to attend. Scalpers also provide an “insurance” for producers, as they protect the producer from negative fluctuations in the ticket market. In 2016, as the Bloomberg states: “Tickets to Desert Trip, the concert featuring music icons such as The Rolling Stones and Bob Dylan, [were] selling for less than half their original price on the secondary market, as speculators appear to have overestimated demand. A three-day pass for the first weekend… was selling for as little as $188 on StubHub, $167 on Vivid Seats and $165 on Ticket City — a steep drop from their original price of $399.” Lastly, through the secondary market, producers gain information about the price of their own tickets. According to the New York Times: “Jeffrey Seller, the lead producer of ‘Hamilton,’ told the Times that he arrived at $849 by ‘continually monitoring the secondary market and finding out where the average is.’” Informed producers can make more educated decisions how to price their tickets.
However, despite the benefits, there are some legitimate concerns regarding ticket scalping. First, as many have pointed out, scalping reduces the attendance of an event, which may cause a loss of profits for producers due to reduced sales of refreshments and parking. Also, related practices such as “ice” involves insider trading where scalpers receive large amounts of tickets early in exchange for a fee. This is and should be illegal in all markets.
To end our inquiry into scalping, let us think about some potential changes we could make to the ticketing process. First, the establishment of authentication features regarding the ticketing process (such as naming tickets or flagging suspicious behavior online). However, this solution introduces inefficiencies into the process such as misidentification of fans as scalpers by bots, having to continuously create new measures to prevent scalper workarounds, or having to bear the extra cost of verifying the identity of concertgoers at the venue. Second, another often proposed solution is banning scalping, though this is in fact quite a poor solution. By banning ticket scalping, we have not addressed the root issue – the mismatch between supply and demand. Doing so will only drive the market underground, causing an increase in the sale of counterfeit and invalid tickets. Lastly, we could raise the price of tickets, increase the supply of tickets, or some combination of both. With information about the “real” price for a ticket through observing scalpers, producers can raise the price of their tickets without endangering public opinion – After all, who would want greedy ticket scalpers to profit at the expense of the artist?