NCPA - National Center for Policy Analysis

The Economics Of Ticket "Scalping"

May 21, 1999

Few have a kind word for professional scalpers -- those who buy up tickets to sports events, concerts or other entertainments and sell them at higher prices to fans. Performers loathe them; fans get enraged.

Massachusetts Institute of Technology economist Paul Krugman takes a look at the economics behind scalping in a recent article.

  • First, for some obscure reason, owners of stadiums and theaters consistently sell tickets to popular events at prices below those which would limit supply to demand -- possibly because they want to ensure sold-out performances.
  • "Beyond this," Krugman writes, "many stadium and theater owners seem to believe that as an overall marketing strategy it is important that access to their most popular events be available to enthusiasts at moderate prices."
  • So scalpers set up a secondary market which does bring supply and demand into balance.
  • Fans are willing to pay scalpers inflated prices as an alternative to standing in line for countless hours to purchase tickets at the box office.

So there is "a running conflict between the long-term thinking represented by the box offices and the short-run market forces represented by the scalpers," Krugman notes.

Source: Macroscope, "Getting Scalped," Investor's Business Daily, May 21, 1999.

 

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