Inefficiency of Event ticketing

While thinking of what I could blog about I was googling hoping to find some things that piqued my interest. I came across an article in the Cato journal that addressed "The Folly of Anti-Scalping Laws." This article coupled with with some of my own observations made me start thinking that the event and sport promoters who decide on ticket prices and allotments were not only working in a way that was not the best for the consumers who wished to see the event but also were operating in a way that was hurting their own possible profits. 

In class we discussed how lines serve as the indicator of someone having a high personal value for a certain ticket, but it would seem that if these people were willing to wait in lines for hours to have the seat they want, they would also be willing to pay a high monetary value for that seat. In this day and age of the internet and ebay it seems like that if the venue truly wanted to maximize their profit that they could find a way to get people to pay their maximum value for the ticket. While obviously there are already tickets that go for exorbitant prices for major concerts such as Bruce Springsteen or U2, it is logical that even some of the people who are willing to pay $200 dollars for one face value ticket are also willing to pay more to ensure that they get the seat they want. Ticket prices serve as a sort of price ceiling and as we saw in class, with a price ceiling, the people who receive the product are not necessarily those who would buy the product if the market was left to go to equilibrium.

Though ticket scalpers often do not deal in these tickets of the highest price, if there was no legislation against them they could help the venue receive a higher revenue. The tickets purchased by the scalper are going to be sold regardless, but the scalpers serve as this determinant of a person's value by asking a price much higher than the face value and then bargaining with a purchaser to try and find the buyer's maximum price. While the price the venue receives for the ticket is going to be the same, someone who is willing to pay $300 for a $50 face value ticket, as is common at Ohio State football games, is much more likely to then spend $20 on food and another $50 on merchandise once they have gotten into the venue, and as most people know, it is concessions and not ticket revenue that produces the biggest profits for venues.

The problem with ticket prices versus demand always applies to people on the other end of the spectrum. In my opinion a major team such as the Ohio State basketball team should never be left having unsold tickets after the game has started. As we discussed in class the opportunity cost for one additional person (or even 1,000 more people) is essentially nothing. With an airline the OC of one more person is low but there is some cost (fuel, drink, etc.), but for an entertainment venue, there is literally no additional cost, as everything from the seat to the people who may have to clean up the patron's trash are already paid for. But still the Schott has thousands of open seats, even for Big Ten games, and as I'm sure everyone has been e-mailed 50 times, "Tickets for Men's Basketball are still available." It seems to me that if a venue dropped their $20 dollar tickets to $5, and only 500 people who would not have considered going to the game all of a sudden changed their minds, that's $2500 of pure profit, not even considering what those 500 would spend on concessions, which as I stated earlier is the big money maker. (With concession prices today, if one of the $5 ticket buyers buy a hot dog and coke they have already paid for more than twice the price of their ticket.) It would even be profitable for venues to allow people to fill their vacant seats for free after the event has started.

The article also talked about the bandwagon effect being a part of entertainment events. Very common at concerts, these are the people who may only know one song but just love the atmosphere at concerts. It seems to me that if the band isn't what draws these people in then it must be that they love getting drunk with their friends while listening to any music, and at $7.50 per beer a venue stands to make some major dough off of these people (this was very evident at the Kings of Leon concert I went to last month where the guy next to me bought 5 times as many beers as songs he knew).

Scalpers simply set up the demand curve that venues refuse to let exist by selling tickets to people at their true value for the good. While they allow the rich to get good seats without them having to wait in line, scalpers also allow people who are too poor or cheap to pay face value and the bandwagoners who will only go if the price is right, to attend the event. Legislation against scalpers not only screws up the demand curve for tickets but also keeps people out of the seats. Once again the fat cats in Washington have to screw up the free market with their "laws" and "regulations."