So what do you think of ticket scalpers? Are they lower level life forms or merely speculators providing a valuable service to the market?
I got to thinking about that because of the commotion surrounding LCD Soundsystem’s show at Madison Square Garden. If you’re immediate reaction is “what’s a liquid crystal display sound system?”, let me provide a little background. LCD Soundsystem is a band fronted by James Murphy. Murphy has had enough of the whole band thing and has decided to retire. To go out in grand style, they are doing their final show at Madison Square Garden. All well and good until the tickets go on sale and scalpers swoop in and grab all the tickets before regular fans.
That gets us back to the question of providing service versus lower life form. If you are curious about where Murphy stands on this question, checkout his post on the band’s website. His story is that they had considering selling out the Garden to be a long shot and hadn’t anticipated “some shitbags would try to get thousands for our show.”
and people—not just people, but proper fans—were pissed. nancy from the band tried to buy tickets. failed. i tried. failed. our best friends—not wanting to hassle us for guestlist spots tried—failed. i bought 2 tickets to my own show for 3 times the value like an idiot to see if real tickets showed up. my family got burned.
Now if you go on eBay, you can find postings like this:
Their immediate reaction has been to add capacity. They couldn’t get the Garden so they are settling for doing four shows at a smaller New York City venue before the MSG show. The expressed intention is to “deflate the market.”
So does this make sense? If what you care about is whether the longtime fan with all your records but not much cash can witness your swan song, yes this make sense. It at least ups the chance that scumbag scalpers do not make a killing on your show.
But are scalpers necessarily scumbags? There are actually some fairly nice papers showing that allowing ticket resale can be a good thing. (This would be a standard citation.) There are a couple of ways of thinking about this. For example, if people are not sure how much they will value the ticket when sales open, the ability to resell them allows for an efficient allocation as those who ex post have high values but did not get to buy at the regular price can get their hands on tickets from those who did buy but turn out to have low valuations. Also, scalpers may induce the provider to make more capacity available since it off loads the risk of having to cut price to clear the market onto the scalpers.
Of course, just because something is “socially efficient” doesn’t necessarily mean that customers will like it since it may just shift dollars to the producers. There are also two other concerns that seem relevant here that the standard econ stories don’t touch. First, there is the question of the sales process. LCD Soundsystem likely wouldn’t object to the scalpers if they had ended up with a few hundred tickets. But if they manage to jump the queue, that skews the market and shuts out some fans. Second, the standard econ story equates how someone values a good with their willingness to pay. If your fans are young enough, how badly they want to see the show could diverge greatly from their ability to pay. Some Brooklyn hipster might well be willing to pay $2,500 to LCD Soundsystem at MSG but not be able to pay that much because of a budget constraint. That could keep the ultimate allocation of tickets from being efficient in the end.
UPDATE: The New York Times had a brief article on LCD Soundsystem’s battle with ticket scalpers. The Band Plays On: An Economic Study, Feb 17.