Sean left an interesting comment on my earlier post which got me thinking:  If Springsteen does not price discriminate ticket sales, the resale market will do it for him, charging high prices for rationed tickets and getting surplus from high willingness to pay consumers.  So, even if Bruce wants to sell tickets for cheap to his fans, the fans get screwed by the scalpers.  Then, Bruce should come up with some other way to help his blue collar fans.  One way would be to price-discriminate like a profit-maximizer and then give refunds to loyal fans.  Maybe, you can use your fan club to give refunds to members who attend your concert or something of that ilk.  And fans might even prefer giving money to Bruce than to scalpers: after all they’re probably pirating all his albums and concerts are his main source of revenue!

So, the prevalence of the resale market is puzzling: why don’t bands, plays etc simply price optimally and eliminate the scalpers?   I looked for some research on this and found a paper by Pascal Courty, “Some Economics of Ticket Resale“.  His theory has two parts:  (Part 1) Suppose some people only realize over time whether they are free to attend a concert while other diehard fans know immediately.  At the time you set ticket prices, the late bloomers do not yet know their demand.  If you price too high the diehard fans will not buy as they can’t afford it.  The late-blooming consumers won’t buy as they’re not yet sure they can attend.  So, the promoter prices low and diehard fans and scalpers buy tickets.  As time goes buy the late bloomers who are free to attend the concert demand tickets and scalpers rip them off.  (Part 2) Scalpers are always more flexible than promoters.  If promoters attempt to enter the late-blooming market, scalpers can always undercut them.

And there is some empirical work too.  Connolly and Krueger in Rockonomics present data on ticket pricing and on Krueger’s experience at a Springsteen concert.

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