If 1000 people want to see a show in a theatre with 1000 seats, that would be an ideal market. But in reality you get 2000 people trying to buy tickets for that show. 1000 are the fans and 1000 are people trying to buy the tickets to flip them for a profit.

The artificial demand creates a market that benefits nobody except the scalpers. The fan loses by paying higher prices, and the artist loses (sometimes) by leaving money on the table. This is why Madonna and the Eagles are charging $750 for front row seats.

The only way that scalpers can create artificial demand is if there are no attendees willing to pay the price scalpers want to charge. In that scenario, scalpers sell to other scalpers at higher and higher prices, and the last person (scalper) to buy loses. If the last scalper buys the ticket for $4,000 and there is no party willing to buy the ticket for at least that AND see the show, the scalper is left with two options - go to the show (which by definition for the scalper provides less utility than the ticket price warrants), or sell the ticket at a loss (or possibly for $0, if there are no buyers).

I think there is a good analogy to other forms of speculation, particularly in commodities. Speculators "drive up" the price of oil by buying and selling it for more and more, but as long as consumers are willing to pay for that oil, the price is justified, and the original sellers forfeited their potential profit.

Granted, oil and housing speculation can lead to bad things for the economy as a whole. Here I think the analogy fails, since tickets are inherently a temporary market with an expiration date. Without an expiration date you can have bubbles, and bubbles can burst.

If I'm a scalper and I buy the last 100 seats (or rather, I have the last 100 seats not taken by someone who actually is going), I can now sell the tickets at a premium. If there are only 75 more fans that want to go, they are forced to come to me and the prices go up artificially. I can still profit without selling all the tickets. Without me the scalper, there would have been enough tickets to go around at face value.

Yes, the price is going up because people are willing to pay for it, but without the scalper it wouldn't have happened.

If a show has 1000 seats, and 900 fans buy the first 900, and never consider reselling at any price, then they are the ones constraining supply relative to an efficient market. (And there's nothing wrong with that, shrug.) The scalpers, by reselling tickets instead of just holding them and ignoring the market price, actually are increasing the amount of tickets available on the market, not lowering it.

Imagine if there were zero scalpers. Then it sells out and price goes to infinity. How can price go to infinity? Because supply is being constrained to zero because people refuse to consider reselling. Scalpers delay that some and keep the market more robust, while also making a profit from underpriced tickets.

And you can never ever sell a ticket to someone for more than the value of the show to them, so the buyers never lose.

All they are "losing" is the ability to get underpriced tickets (tickets for less than they are willing to pay) from the original seller who could have charged more (since he controlled all the tickets) but, for whatever reason, preferred to leave some money on the table for scalpers.

The problem, for me, isn't with scalpers, it's with income and wealth distribution (which separates nominal demand from actual benefit to useful people), with over-regulation of commercial performance (limiting the number of venues through regulatory capture), and with the destruction of local community (since there are no local acts anymore, everyone chases the same small number of national and international ones.)

Of course Louie C.K. generates a massive demand - in a country of 300 million people, he's one of the 50 comedians that anybody has heard of because he makes it into the national media. When the average person can name a few comedians that live and work in their neighborhood, going to a Louie C.K. show will be considered a luxury good AND the price will go down.

The cost of ticket 1001 to a 1000-ticket show is infinity, regardless of whether you have scalpers or not. Increasing the price of the last 100 tickets does not mean you have increased ticket supply, all it means is you have taken 100 tickets from earlier, creating an artificial scarcity, and sold them later. Those hundred buyers that 'don't lose' down the track do so at the expense of a hundred buyers that lost earlier.

xenophanes is making funny with numbers because he's comparing the price of ticket 1001 in the non-scalper system with the price of ticket 901 in the scalper system.

The only problem I have with it is that due to general political market distortions, money is very cheap to a small number of people who do very little and have lots of leisure time, so the dollar commitment for a ticket price has little relation to either subjective or objective (ideal) utility.

As a performer, I'd have an interest in keeping the ticket prices low simply because I wouldn't want an audience filled with the kind of assholes who would pay $500 for a ticket to a two hour comedy show. If I really adored Louie C.K., was one of those assholes, and it took 11 minutes to get to the site to buy a ticket that sold out in 10, I'd hope that scalpers got a significant amount of those tickets.

Hell, even if I wasn't one of those assholes I'd hope for scalpers, because if they overestimated demand and priced too high, they might end up dumping tickets at the last minute and I might end up paying less than face value. Instead of not being able to get a ticket at any price, the tickets are handed out based on how much you're willing to commit to get them. If demand then raises the prices to $1000, I can still get a ticket if I love Louie C.K. more than I love keeping my apartment.

Because, really:

the number of people who lose = the number of people who would go to the show for free - 1000

Personally, I lose at face value, because the day I pay $50 for a concert is going to be the day a gallon of milk goes for $15. It doesn't mean that I don't like Louie C.K., it just means that I like 3 gallons of milk more. Everybody makes their own call, whether it's when the cost goes over $10, over $1000, or over $55 + F5ing a site for 6 hours.

How often would CK have to perform to make scalping essentially a non-issue?

More than once a year I would guess. But once a month? Every week?

What factors determine this?

I can't buy a show for Denver. I might not even be able to buy a show for Friday nights. That severely limits the pool of "supply" I can buy from. Louis might be in my city once a year for a few days if I'm lucky.

The problem I see is that it's speculation with a known outcome. If I buy gas or oil forward contracts, it's a play with non-zero risk. Iran might declare war or we might invent Mr Fusion tomorrow. So far so good.

But with a concert, let's be a bit more realistic. If the Rolling Stones decide to tour and play in your town this year you can be 100.00% sure the concert would sell out. If they quadrupled the dates in that town, they would still sell out. For a given set of acts that scalpers target, there is no possible way that there is a risk of scalpers holding expired tickets...unless they get greedy.

What you're implying is that there is infinite demand for a Rolling Stones concert at any price. As far as I know, this is a concept on the extreme edge of economic theory. Maybe there could be infinite demand for necessities like oxygen should we be forced to make a decision, but for a concert the notion is absurd. If the tickets were priced at $1,000,000 per seat, I doubt you would sell out.

The bottom line is that there IS an appropriate price which will maximize consumer and producer surplus utility (the positive difference between what you were willing to buy/sell the goods for and what you actually bought/sold the goods for), and scalpers/secondary markets will exist when the principal seller misprices the tickets. Without the secondary markets, that ideal price will probably not be reached, and there will be a shortage or surplus of the goods.

Edit: a common "rebuttal" in this thread (see diek, potch, drivingmenuts) seems to be that there is an assumption of correct market price being the aim. That isn't the assumption or the point. The point is that excess demand creates the problem. There are several approaches to this (first come first served, lottery, aftermarket) but getting rid of scalpers doesn't solve the fundamental problem. The only thing they (may) be doing wrong is going against the wishes of the artist (if they prefer to use another method). It's not clear that e.g lottery is better than finding the true price (or vice versa).

1-This is inherently a class-based argument. It assumes that someone with more money than you isn't a 'real fan' and that his true fans are the squeezed middle class (or whatever class-bracket you happen to be in).

2-The world doesn't owe you anything. Thinking this is unfair because you can't afford tickets to a stand-up comedy show is the epitome of a First-World problem.

edit: this isn't exactly a reply to sambe's comment. I was taking his 'Correct Market Pricing' comment that was addressed at the rebuttals and adding to it.

Anyone that has tried to deal with buying tickets (either in today's system or even back in the old days where you had to stand in line) knows that there are people with large sums of cash willing to pay people to stand in line or bombard ticketmaster.com with requests to land tickets for a show they have no intention of seeing. They resell those tickets immediately for a profit to the people that really wanted to see the show. Go look at StubHub.com 30 minutes after a popular rock concert goes on sale. Did every single one of those sellers have a sick grandmother pop up?

No, the world doesn't owe anyone anything, and this isn't a white whine. It's an example of how people with more time and resources than you can jump ahead of you in line and, as a result either deny you an experience or make you pay more out of pocket for it...all in the name of profit.

Isn't that the way the world works? We aren't talking about access to food, education, or healthcare here. We're talking about entertainment. Is there a particular reason why someone with more time or money shouldn't have an edge and be able to spend their money to do something someone with less money can't do?

If you fly enough you also can get upgraded to first class cabin. Is there something not fair about that as well?

Because the performer wants them to be able to?

I'm so sick of HN over-intellectualizing topics in order to avoid the difficult discussions of ethics. I'm guessing they're avoided because (gasp) it isn't objective. The horror!

For example last time I was in London I just happened to see that a band I liked was playing that evening. Having no other plans I wandered up to the venue a couple of hours before opening and a kind gentleman outside was happy to sell me a ticket. Sure I paid roughly double the value printed on the ticket, but to me it was worth it for the service and convenience.

Now I'm not saying that scalping is the best solution to this problem, but there is definitely a market here (for tickets on short notice in my case) and money to be made and value to be added.

And no, it's not a blanket statement of the way the world works. There's plenty of things like copyright that prevent a gorilla just coming along and taking your toys for themselves.

People want to see Louis because he is funny. The minute he stops being funny all that good will won't mean a thing.

First, I think comedians are a little different then other types of artists who have a little more latitude in their work. I'm speaking specifically about the buzz that surrounds this particular artist right now who is very funny. And what I'm saying is that if he stops being funny, in general or not as funny, the goodwill that he built up won't matter in terms of bringing a significant number of people to his shows.

And if he becomes funny again people will want to attend his shows regardless of something like what he is doing. I don't believe the fact that (this type of) goodwill would make a big difference in how quickly the audience returns.

And in any case the reason any artists matters at all is because they provide entertainment that people like. That is their product. The "good will" part isn't what got them to where they are today and won't keep them there if they fail to deliver.

The old Howard Stern (haven't listened to him since he was on non satellite was quite the asshole in many cases. Despite that he had a big following even from people who thought he was a dick. Because he provided entertainment that people like they overlooked undesirable things about him.

You seem to be against Louis C.K. having the freedom to sell his product how and at the price he chooses (for whatever reasons he thinks are of merit). Why?

However, other people are saying them and I'm with you - both are fallacies. Particularly on the first, I'd suggest to "real fans" that they consider whether they prefer paying more than face value or not going at all (just in terms of their utility, not as a point of principle). If the latter, then consider the option of refusing the higher price - same result, you don't go! There are no easy solutions.

The perceived issue - I guess - is when a very high percentage of tickets become resold and you don't agree with this method. I'd say your very small chance of getting a face value ticket is still representative of a world without scalpers as they are, as always, acting as a proxy for real demand, which would otherwise be competing with you for face value tickets directly.

You say 'flip them for profit' as if thats a bad thing, but as long as people buy those tickets, its just smoothing out the market.

The add-on effect he's looking for is fan retention over time. If 500 people bought from a scalper at some much higher price, there's a small chance that they will become disgruntled and stop being fans. In the long term, he could lose that business.

But if he himself levels out the market, the fans have less to lose. Sure, the artist takes a hit, but that's on him. He can always do something different next time if he's dissatisfied with his revenue.

Remember that this is a guy who made so much money the last time, that he was somewhat nervous. I don't think he's thinking about it the same way you are.

As for "not doing anyone any favors": way I see it, he's doing his fans a favor by keeping the ticket prices affordable.

Also, fans don't work the way you think they do. If I like Louis CK, I like Louis CK. If he chooses to charge $500 for a ticket, I will just watch him on TV. It won't cause me to resent him.

In a perfect market, if enough people feel the same way, the price will drop down into the range that I am comfortable paying. If, on the other hand, he has so many fans that some are willing to pay exorbitant amounts to see him live, I will be forced to watch him on TV.

If he wants to give everyone (rich and poor) the chance to experience his set live, he needs to increase supply by touring more.

No? True fans are alone, and true fans are not necessarily the earliest at the gate. If scalpers can grab half the tickets before the show's sold out by buying in bulk, they're going to make a lot of money. Because now they control the product.

> he needs to increase supply by touring more.

He's booked 67 dates, he's only one guy, touring more? He'll need to put his million of sales in cloning if he wants to do that.

But he's at least found a way to keep control on prices and scalping and give everybody equal opportunity.

Without scalpers, "first at the gate" is the only way to get tickets.

If we're going no true scotsman, I'd say the true fans ARE the earliest at the gate. They're the ones who camp out for weeks.

So really, you're sticking up for the fair-weather fans who can't be bothered to put in the extra effort to get their tickets at face value.

Also, "true fans are not necessarily the earliest at the gate" is not an example of No True Scotsman, it's an example of Some True Scotsmen, the exact opposite.

So the scalpers are profiting from the mismatch in supply and demand and making the show less accessible to the fans. From a scalper POV, that's capitalism. God bless America. From the fans's POV, it just sucks.

And I could swap Louis CK for oil, and scalpers for Goldman Sachs, you know. Same thing IMO.

And the artist's POV as well, his fans are now poorer and there's no value into it: they don't enjoy it more, they don't get more merch, they don't keep their money to see the next show, they don't get to buy a nice dinner for their SO, etc...

If the scalpers didn't exist, the eventual ticket-holders would still be able to purchase from the original vendor. It's not like scalpers make tickets magically appear.

A lot of them wouldn't, though. If the scalpers sell the tickets for, say, $500, then the people willing to pay $500 get tickets pretty reliably. If the scalpers didn't exist, those people would have to take a roll of the dice along with the many, many more people who are willing to pay $45. A lot of them wouldn't be able to see the show.

Really, my point is more that those tickets were going to sell anyway, and all the scalpers are doing is reducing the potential audience for those tickets. I don't see how this specific market is 'smoothed' by this practise.

If people are willing to pay that much and he delivers a show that is up to his normal standard, they won't hate him for charging them that much; quite the opposite actually. It's only the price gauging and poor service of monopolies that people tend to hate (and for good reason).

Now, if you are saying 'what about the people who cant afford $150 for tickets?'. If it's not a charity show, the world definitely does not owe you tickets to a stand-up comedy show. On the other hand, charity shows are fine, but he should call it like it is if thats the case. $50 for tickets means the rich will pay less than theyre willing to pay and the poor won't get in anyways. No one wins in that situation.

How precisely is the scalper, by increasing costs and adding _no value_ doing us a service?

That's parasitism.

Do you think running a corner store is "parasitism"?

You may not like scalping but there's no point being blinkered about it.

The arguments for scalping only work if the effects of the scalping are ignored. Eliminating scalpers benefits everyone.

I don't support scalping but wish the artists and promoters would step up the fight themselves too.

That's exactly what Louis CK is doing.

> Without the higher price tickets available from the scalpers, they would not have been able to go.

Again, this is assuming that the amount of competition for the tickets is not affected by the scalpers. In reality, the scalpers are exactly the ones driving the scarcity.

Here, go learn what a demand curve looks like and then think more carefully about this: http://www.khanacademy.org/finance-economics/microeconomics/...

With scalping, the first 1000 people who show up still get tickets. 900 of them are scalpers. (So if you were in the first 100, you still got to pay face value.) I'm being very generous with this scenario--I've personally never seen a situation where this was a real problem, as I've gone to every ticketed event I've ever wanted to paying face value.

The 900 scalpers all pick different prices. At $40, there are about 2000 people left in town who want to buy a ticket. Some of them get tickets, but the other scalpers get wise and think, why not charge more? So they charge $50. Or $60. Eventually they reach a point where there are exactly n tickets left, and exactly n people left in town who are willing to buy at that price. If the scalpers overprice the ticket, no one will buy, so they'll need to lower the price again. But generally, what's reached is a fair price that sees all the tickets go to people who actually were willing to buy them at the price they bought them at.

So let's look at what's happened. Without scalping, you have 4000 people who missed out on buying tickets because they weren't first in line and 1000 people going to a show. With scalping, you still have 1000 people going to a show, but instead of all of them being picked on the less-than-perfectly-fair basis of who was first in line (which is a disadvantage to people with more work, more responsibilities, inconveniently timed emergencies, and slow internet connections), some of them are picked based on who was first in line, and some of them are picked based on who was willing to pay more (which is a disadvantage to people with less money).

You might think, well, it's better to be unfair to busy people than to be unfair to poor people. But let's change this thought experiment and say the face value of the tickets was $60 to begin with instead of $20, and at $60, there are exactly 1000 people in town who are willing to buy a ticket. Now there are no scalpers (or if any scalpers do show up, they can only resell the ticket for face value anyway). I would argue that this scenario is strictly less fair than the scenario where the face value was $20 and there was some scalping, because at least in the first scenario, it was possible to get a lower price by getting in line first!

Fundamentally, what difference does it make who's setting the price? You might say, well, if the face value was $60, at least the performer (or the venue, or the ticket vendor) is getting the extra money, not just some "scalper". But the scalper is effectively getting in line for you. He's going out of his way to do the leg work for you. You know who else we pay a premium to for doing the leg work? Shopkeepers. Sure, if we really wanted to, we could go to some warehouse and save some money by buying all our stuff off a pallet. (You still can if you want to--it's called Costco.) But maybe I'd rather some other guy does all that legwork for me, and in exchange, I'll pay more. And if you're running around doing legwork for other people, you are benefitting those people.

On my blog (http://www.ticketeconomist.com/prices-101/), I have a chart that observes internet ticket resale for a couple of sold out concerts in 2005 and 2006. Sticking with your terms, the 900 and the 100 bought and sold out the show in 2 minutes. Now, 900 people who wanted to actually buy tickets and see the show have to go to the secondary market. 900 speculators crowded out 900 fans and now they are clearing prices that are anywhere from $10 to $100 above face. It is relevant to point out that the 900 have a number of methods for essentially cutting the line, so there are instances where the "service" involved some form of cheating the system. Is that good?

In fairness, the scenario you present is also not the norm. More often, 1,000 sophisticated buyers compete with 15,000 average Joe buyers for 10,000 tickets. The 1,000 buy the best 2,000 seats and the 15,000 fight it out for remaining 8,000 tickets, assuming there are no hold backs and that Ticketmaster's website works properly, which it often does not. At that point, some fraction of 11,000 desperate and dedicated fans turn to StubHub, eBay, etc. to find that that the $90 ticket is now $190. On the one hand, there was never enough supply to go around in the first place, on the other, 1,000 buyers were crowded out by speculators. The efficient market is really not so efficient with tickets for a complex series of reasons.

Finally, there are some sophisticated buyers who know that they can wait it out and buy tickets at or near face value close to show time. We are among those few, for now.

And if you think that problem is somehow created by the scalpers, go learn what a demand curve looks like. When tickets are underpriced badly enough, obsessive fans with fewer responsibilities are going to buy up all the tickets before I'll have a chance. If the prices are high enough relative to demand that I actually could buy tickets whenever I want, 24/7, then scalpers are irrelevant. Even if they did buy up all the tickets, they'd have to sell them back to me at basically face value. Scalpers aren't a cartel or anything, they can't fix prices, and their inventory goes bad almost instantly when the event actually happens.

The convenience argument isn't actually that critical, though. What's more critical is that by allowing people to get tickets two different ways--either buying them earlier, OR paying more--scalpers also make the ticket distribution more fair, not just more convenient for those willing to pay more.

We all want special treatment, but resent it when other people get it. When a government distributes scarce resources unevenly by providing greater access to people who are wiling to pay more on an unregulated market, we don't call that 'making resource distribution more fair by increasing options,' we call it corruption. It's quite possible to make a seemingly well-reasoned argument that corruption is fine starting from the same basis, but most people will find the idea as repugnant as ticket scalping for basically the same reason. In short, I don't think your definition of "fair" as pertains to scalping is particularly meaningful.

For what it's worth, I bought my tickets about a week after they went on sale and had no trouble.

The entire purpose of prices is to help distribute scarce resources efficiently. Just like Nixon's notorious attempt of putting price controls on gasoline, government messes things up when it tries to dictate a lower-than-market-clearing price. And it's hard to get me worked up with a fundamental justice argument over luxury goods anyway.

Also, a side effect of this is that below-market value tickets create a shortage, which in turn makes it valuable to be the first to learn about new tickets. This has to be driving signups to his mailing list and twitter feed.

God bless the US health system!

$50 for tickets means the rich will pay less than theyre willing to pay and the poor won't get in anyways. No one wins in that situation.

Economists are crazy. A full house is a full house. The people who win are the people who attended. How you can possibly say 'no-one wins' from a full house of successful comedy on the cheap is beyond me. Yeah, bummer, the cheap tickets to a very entertaining night left us all feeling crappy...

Secondly you're ignoring the broader message sent by charging $150. Even if he can find enough people willing to pay that to fill a small venue, it risks sending the wrong message and pissing off people who might otherwise have bought his DVDs, watched his TV shows or gone to other shows. So now instead of being seen as broadly popular "man of the people" who "sticks up for his fans" with wide appeal, he's seen as a stuck up rich fucker entertaining other stuck-up rich fuckers. This will have obviously negative effects on his TV ratings, where I suspect is where he makes most of his money.

Except fans. Who can now buy his DVDs or other swag. (Or afford both his show, and rent.)

If your goal is to get as much money as quickly as possible, there's another word for that. Short-sightedness.

It would be interesting to see if there was any way to implement a similar system for concerts and shows.

"My guess as to what will eventually happen if / when Live Nation and TicketMaster merges is that they'll move to an auction or market-based pricing scheme - which will simply mean it will cost a lot more to get a good seat for a hot show. They will simply BECOME the scalper, eliminating them from the mix."

http://forum.nin.com/bb/read.php?59,548515

It might make the market more effecient. But it annoys your customers.