Ticket Pricing for Performance Goods and Scalping in the Secondary Market
Abstract
This paper studies the case of the market for performance tickets where promoters sell
tickets to consumers at a fixed level of supply with monopoly power over prices. Due to
deliberate under-pricing of tickets below the market-clearing price by promoters, which
creates excess demand, and the fact that different consumers learn different things about
their demand over time, a profit opportunity emerges in a secondary market for brokers to
resell tickets to consumers entering the market late. Brokers clear the market at or near
equilibrium prices that were purposefully undercut by promoters. Promoters promote
restrictive measures on resale, in the name of fairness, to try and eliminate brokers so
they can capture the late profits they are currently unable to receive.