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Sellers of Scarce Goods

August 25, 2006

"All hail ticket scalpers." No, that doesn't come from a libertarian. It comes from a sportswriter. Jim Caple says:

Scalpers generally are portrayed as a seedy bunch of grifters only a few steps up the food chain from child pornographers, fantasy football participants and Pete Rose's circle of friends. I don't see it that way, though. Rather than a bigger blight on society than the Backstreet Boys, the scalper is a humble businessperson and a fan's best friend, next to $1 Heineken Night.

Is there a more victimless crime than scalping? Of course not. It is capitalism at its purest level. An event is sold out, you need a ticket and the scalper provides you one at a mutually agreed upon price. You don't need to be Louis Rukeyser to understand the remarkable efficiency of this market.

scalper.jpg Jim has a willingness to learn some economics! He notes that sports teams, like baseball's Mariners and Giants, now have online services wherein season ticket holders can sell their individual tickets in the marketplace, and for more than face value. But government laws always make such things difficult. The Seattle Mariners season ticket holders that live in Seattle face anti-scalping laws, so the online service can only offer the service to non-Seattle resident ticket holders.According to a Cato paper, the "first legislation in the United States that focused specifically on ticket scalping appeared in 1918 in response to limited-access stage shows." In fact, a whole paper was drawn up, at Cato, for the purpose of suggesting legislative reforms. Another paper, from Craig A. Depken, II suggests - through the use of mathematical models - that cities with anti-scalping laws actually tend toward having higher ticket prices at the window. He notes, of course, that market intervention should pass some efficiency criteria, and thus concludes that he does not see where anti-scalping legislation improves social welfare.

Rolling Stone once ran an article, Can Scalpers Be Stopped? Stones management came up with a "platinum club" membership, and for $100, fans could join and assure themselves of tickets for the tour. Surprise, surprise - the ticket scalpers joined the club, paid the fee, and passed on the cost by raising the ticket price. When Paul McCartney sold tickets to his fan club members first, the ticket scalpers just joined the fan club to get the prime seats!

So why do these rockers try to upend scalping with pre-sales and fan clubs and platinum clubs? Do they perceive it as a benefit to their fans, in the form of lower ticket prices? Not really, because the fans pay the cost in the form of pre-sale fees or joining the club, which can get very pricey. So do they merely want to create the perception that they are "trying to do somethng?" After all, people who pay "scalping" prices are the greatest fans of all. They are the ones that value the service most. So why are the rockers so consumed by the notion that they must give the average Joe "a chance" to get tickets, and then they charge him a $100 membership to get that chance, when the alternative is that a ticket scalper - I call them brokers - would buy it at face value, and sell it to the most willing buyer? The latter scenario produces the most willing buyer while the former is merely a show of faith toward certain participants that aren't necessarily among the most willing buyers in the marketplace.

But, all models and pandering aside, ticket scalping is simple: Individual sellers have the ownership of a scarce economic good, and they willingly fork over ownership of the good to a willing buyer, at a price agreed upon by both (or all) parties to the transaction. As usual, state intervention in this case means that your property is not your property to do what you want with it.

Jim Caple closes with this:

Better to keep it simple and get rid of the scalping bans entirely. After all, we live in a capitalistic society. We can buy a house, a car, a Monet or an Ichiro bobble-head doll, then turn around and resell it for whatever price we can get. Why not be able to do so with a ticket to a game?

The reason is the use of mathematical modeling within economics to determine the efficiency of a given transaction -- which meets with government intervention if the transaction is said to reduce social welfare. Sporting event tickets have a very fixed supply, and an uncertain demand, and thus demands a close look from the social welfare theorists.

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