Ticket prices for athletic events and musical concerts are usually set far in ad
ID: 1140288 • Letter: T
Question
Ticket prices for athletic events and musical concerts are usually set far in advance of the events. Sometimes the original ticket price is too low to be the equilibrium price. Lines form at the ticket window and a severe shortage of tickets occurs at the printed price. What happens next? Buyers who are willing to pay more than the original price bid up the ticket price in resale ticket markets.Tickets sometimes get resold for much greater amounts than the original price—market transactions known as “scalping.” For example, an original buyer may resell a $75 ticket to a concert for $200. Reporters sometimes denounce scalpers for “ripping off” buyers by charging “exorbitant” prices.
But is scalping really a rip-off? We must first recognize that such ticket resales are voluntary transactions. If both buyer and seller did not expect to gain from the exchange, it would not occur! The seller must value the $200 more than seeing the event, and the buyer must value seeing the event at $200 or more. So there are no losers or victims here: Both buyer and seller benefit from the transaction. The scalping market simply redistributes assets (game or concert tickets) from those who would rather have the money (and the other things that the money can buy) to those who would rather have the tickets.
Does scalping impose losses or injury on the sponsors of the event? If the sponsors are injured, it is because they initially priced tickets below the equilibrium level. Perhaps they did this to create a long waiting line and the attendant news media publicity. Alternatively, they may have had a genuine desire to keep tickets affordable for lower-income, ardent fans. In either case, the event sponsors suffer an opportunity cost in the form of less ticket revenue than they might have otherwise received. But such losses are self-inflicted and separate and distinct from the fact that some tickets are later resold at a higher price.
So is ticket scalping undesirable? Not on economic grounds! It is an entirely voluntary activity that benefits both sellers and buyers.
What are your own thoughts based on economic and non-economic grounds? What have you learned in the Chapter on Demand and Supply’s basic principles that help to refine your answers? Ticket prices for athletic events and musical concerts are usually set far in advance of the events. Sometimes the original ticket price is too low to be the equilibrium price. Lines form at the ticket window and a severe shortage of tickets occurs at the printed price. What happens next? Buyers who are willing to pay more than the original price bid up the ticket price in resale ticket markets.
Tickets sometimes get resold for much greater amounts than the original price—market transactions known as “scalping.” For example, an original buyer may resell a $75 ticket to a concert for $200. Reporters sometimes denounce scalpers for “ripping off” buyers by charging “exorbitant” prices.
But is scalping really a rip-off? We must first recognize that such ticket resales are voluntary transactions. If both buyer and seller did not expect to gain from the exchange, it would not occur! The seller must value the $200 more than seeing the event, and the buyer must value seeing the event at $200 or more. So there are no losers or victims here: Both buyer and seller benefit from the transaction. The scalping market simply redistributes assets (game or concert tickets) from those who would rather have the money (and the other things that the money can buy) to those who would rather have the tickets.
Does scalping impose losses or injury on the sponsors of the event? If the sponsors are injured, it is because they initially priced tickets below the equilibrium level. Perhaps they did this to create a long waiting line and the attendant news media publicity. Alternatively, they may have had a genuine desire to keep tickets affordable for lower-income, ardent fans. In either case, the event sponsors suffer an opportunity cost in the form of less ticket revenue than they might have otherwise received. But such losses are self-inflicted and separate and distinct from the fact that some tickets are later resold at a higher price.
So is ticket scalping undesirable? Not on economic grounds! It is an entirely voluntary activity that benefits both sellers and buyers.
What are your own thoughts based on economic and non-economic grounds? What have you learned in the Chapter on Demand and Supply’s basic principles that help to refine your answers? Ticket prices for athletic events and musical concerts are usually set far in advance of the events. Sometimes the original ticket price is too low to be the equilibrium price. Lines form at the ticket window and a severe shortage of tickets occurs at the printed price. What happens next? Buyers who are willing to pay more than the original price bid up the ticket price in resale ticket markets.
Tickets sometimes get resold for much greater amounts than the original price—market transactions known as “scalping.” For example, an original buyer may resell a $75 ticket to a concert for $200. Reporters sometimes denounce scalpers for “ripping off” buyers by charging “exorbitant” prices.
But is scalping really a rip-off? We must first recognize that such ticket resales are voluntary transactions. If both buyer and seller did not expect to gain from the exchange, it would not occur! The seller must value the $200 more than seeing the event, and the buyer must value seeing the event at $200 or more. So there are no losers or victims here: Both buyer and seller benefit from the transaction. The scalping market simply redistributes assets (game or concert tickets) from those who would rather have the money (and the other things that the money can buy) to those who would rather have the tickets.
Does scalping impose losses or injury on the sponsors of the event? If the sponsors are injured, it is because they initially priced tickets below the equilibrium level. Perhaps they did this to create a long waiting line and the attendant news media publicity. Alternatively, they may have had a genuine desire to keep tickets affordable for lower-income, ardent fans. In either case, the event sponsors suffer an opportunity cost in the form of less ticket revenue than they might have otherwise received. But such losses are self-inflicted and separate and distinct from the fact that some tickets are later resold at a higher price.
So is ticket scalping undesirable? Not on economic grounds! It is an entirely voluntary activity that benefits both sellers and buyers.
What are your own thoughts based on economic and non-economic grounds? What have you learned in the Chapter on Demand and Supply’s basic principles that help to refine your answers?
Explanation / Answer
Scalping is reselling a high valued good outside the legal or defined market for a good or service. Scalping is unethical and suboptimal from non-economical and economical ground.
On non economical ground scalping deprive the original producer of the good from the desired revenue or profit. The reseller may not have the right to resale the tickets outside the defined market. Thus, scalping is unethical.
On economical ground in competitive market the equilibrium price is set at the equilibrium between marginal cost of the good and marginal benefit of the good. That is demand and supply. Thus, the ticket cost $75 to produce additionally. The benefit of the last unit is also $75 for the last consumer. But in case of scaloing the scalper produce the good at $75 and sell them at much higher price. This earns the scalper profit and distorts resources in the economy by creating deadweightloss. Because at scalping equilibrium MB is not equal to MC. Then from economic point of view scalping is inefficient market outcome.