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Ticket Pricing and Scalping: A Game Theoretical Approach

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  • Sá Nelson

    (Department of Economics, Vassar College, 124 Raymond Ave., Poughkeepsie, NY 12603, USA)

  • Turkay Evsen

    (Department of Economics, Vassar College, 124 Raymond Ave., Poughkeepsie, NY 12603, USA)

Abstract

Ticket scalping is frequently related to the economic puzzle of underpricing by promoters. It is also disputed whether event promoters benefit from scalper participation or not. Our article explores two questions: can promoters benefit from scalpers’ activities and what are the resulting consumer welfare effects? We address these questions by developing a three period game where the secondary market is supported by an auction mechanism, interacting with primary market decisions. We find that participation by scalpers can lead to underpricing in the primary market and that this may benefit small or credit-constrained promoters. This requires the scalper’s discount factor to be higher than the promoter’s discount factor. The necessary premium on the discount factor increases with the fraction of early buyers and decreases with market size. Finally, the effect of scalper participation on aggregate consumer welfare is shown to be positive for a large enough market size or discount rate for the scalper.

Suggested Citation

  • Sá Nelson & Turkay Evsen, 2013. "Ticket Pricing and Scalping: A Game Theoretical Approach," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 13(2), pages 627-653, September.
    • Handle: RePEc:bpj:bejeap:v:13:y:2013:i:2:p:627-653:n:21
    DOI: 10.1515/bejeap-2013-0042
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    References listed on IDEAS

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    1. Becker, Gary S, 1991. "A Note on Restaurant Pricing and Other Examples of Social Influences on Price," Journal of Political Economy, University of Chicago Press, vol. 99(5), pages 1109-1116, October.
    2. Krishna, Vijay, 2009. "Auction Theory," Elsevier Monographs, Elsevier, edition 2, number 9780123745071.
    3. Phillip Leslie & Alan Sorensen, 2009. "The Welfare Effects of Ticket Resale," NBER Working Papers 15476, National Bureau of Economic Research, Inc.
    4. Becker, Gary S, 1991. "A Note on Restaurant Pricing and Other Examples of Social Influences on Price," Journal of Political Economy, University of Chicago Press, vol. 99(5), pages 1109-1116, October.
    5. Pascal COURTY, 2000. "An economic guide to ticket pricing in the entertainment industry," Discussion Papers (REL - Recherches Economiques de Louvain) 2000024, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
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