Thursday, December 9, 2010

Are Economists Wrong About Secondary Ticket Sales?

Truly, there is a special place in Hell for people who buy Rose Bowl tickets with the sole intention of profiting from them. It is entirely unfair to those who actually love this football team and were counting on a cheap face value ticket in order to make the trip to Pasadena an economic reality

From University of Wisconsin's student paper the Badger Herald. The knee jerk economists reaction is that reselling tickets is efficient. If you can resell those who are willing to pay the most will get the tickets and those who want to pay less and win the lottery for tickets will get extra money. Those who lose the lottery should be indifferent. Now one point could be that the chance of losing is greater if the number of people participating in the lottery increases, because there are easy profits to be made. It should be noted although I didn't do it, I kept meaning in grad school at Wisconsin to sign up for football season tickets to resell them at a profit and get a couple of games free.

Now what economists may miss. I think most economists would do the analysis using consumer surplus that is the benefit is measured by the
#1) benefit = the most someone would pay - what they paid

Instead I think most people think the benefit might be measured as
#2) benefit = happiness from going to the Rosebowl - what they paid.

For students with limited funds, it's possible that way#1 and way #2 will yield different socially optimal distributions. It comes down to how close money and happiness are linked, which is a whole other line of research.

This is just a thought exercise, but it is worth thinking when economists disagree with public reaction strongly, how we reach our conclusions

h/t to Phil Miller at the Sports Economist

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Braden said...

Yes, people with less money may have higher marginal utility. But progressive taxes are a much simpler solution to this problem than individually addressing it in every market.

Seth Gitter said...

Braden, true but the Badgers need to figure a way to optimally allocate tickets. It wouldn't be too hard to require ID at will call to enforce it. I think some events do this to prevent resales.