Durable goods are defined as a product that “consumers derive the benefit from the purchase of the good over a number of periods … [and] consumers can decide the timing of their purchase” (Belleflamme and Peitz 2007). Tickets to games and shows are considered durable goods in the sense that consumers who buy tickets to a performance receive an “experience” they carry with them. For example, the experience of going to a Warriors game this year would stay with you forever as Steph Curry has officially reached Wu-Tang’s “for the children” status. Besides, someone who sees tonight’s show is generally unwilling to pay as much for a ticket for tomorrow’s show.
Tickets are first sold in primary markets and are issued at the box office or online with a face price printed on them. In 2011 and 2013, the average price for a music tour concert admission was about 78 dollars, but this number increased to 82 dollars in 2014. In addition, the concert ticket sales revenue from 1990 to 2014 amounted to 6.2 billion dollars (Statista 2016).
Courty’s model of ticket pricing suggests two reasons why promoters would want to deter brokers. First, consumers who buy late lose out in equilibrium since “brokers capture some of their surplus” (Courty 2003). Consumers usually ask promoters to intervene for a fairer price, which would result in promoters being caught in the middle of a conflict that is really between consumers and brokers. Second, promoters want to take advantage of the profits that can be earned in the late market. The model shows that unless resale is prohibited, promoters should not offer any additional tickets in the late market for equilibrium outcomes. Thus, we observe many restrictions from promoters upon brokers.
That was the story thirteen years ago. Today, resale websites such as SeatGeek and StubHub allow anyone to upload their tickets and price them freely to sell. Most sites focus more on transparency than getting a good deal by using phrases like “the price you set is the price buyers see.” As a result, information is more symmetric between sellers and buyers, which leads to the strategy of getting fairly priced tickets.
People typically try to buy tickers from resellers right when they go on sale or just before the show. Supply seems to be highly constrained by demand during the first few days that tickets go on sale. Researchers find that ticket prices during the first couple of months are all over the place and are especially pricey when the tickets went on sale on resale websites. Also, in the two weeks leading up to the concert, a buying and selling frenzy brings most of the auctioned ticket prices down, sometimes even below the primary market ticket value. Therefore, the ideal time to look for tickets at auction is in the two weeks leading up to a given event.
Interestingly, celebrity musicians and other famous touring performers face problems similar to those of a durable good seller with market power. Todd Kendall (2005) investigates how the durable good monopolist could lead to high rates of drug abuse and other self-destructive behavior observed among celebrities in his paper “Durable Good Celebrities.”
Belleflamme, P., & Peitz, M. (2007). Industrial Organization: Markets and Strategies. Cambridge, UK: Cambridge University Press.
Concert ticket sales revenue in North America from 1990 to 2014 (in billion U.S. dollars). (n.d.). Retrieved March 21, 2016, from http://www.statista.com/
Courty, P. (2003). Some Economics of Ticket Resale. Journal of Economic Perspectives, 17(2), 85-97.
Kendall, T. D. (n.d.). Durable Good Celebrities. SSRN Electronic Journal SSRN Journal.
The Ticket Economist | The politics and economics of ticket resale (aka scalping). (n.d.). Retrieved March 21, 2016, from http://www.ticketeconomist.com/