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The scalper provides no value to the market

The scalper allows the devoted fan who is gladly willing to pay $X+N to actually get a ticket rather than having to wake up at 6am and repeatedly refresh the site and probably still not get one.

I find market failures like this fascinating because it really shows the limits of how "free" markets operate.

How would central planning handle this better? There are more people who want to buy a ticket at $X than there are seats available; lots of people are going to be unhappy regardless of how they get distributed.

A devoted fan will have no issue to wake up a 6am and try to buy a ticket. They'll have more chance to get one if they don't have to compete with scalpers. Half the tickets could be sold as first arrived, first served, and half as a lottery system. The ratio might be adjusted.

If we agree that scalpers are a problem, we can make it illegal to resell ticket over the original price. Enforcement is always a problem, so to help with that it could be required to have an ID matching the ticket name and resell can only be performed on official platform.

To grantee having a ticket with this system, a wealthy or connected devoted fan can have private arrangement with the artist manager or event organizer to get tickets.

> To grantee having a ticket with this system, a wealthy or connected devoted fan can have private arrangement with the artist manager or event organizer to get tickets.

This is the system we have right now. Ticketmaster is the event organizer.

"A devoted fan will have no issue to wake up a 6am and try to buy a ticket."

Oh really? What if they are at work at 6am? So take a day off work? You just greatly increased the dollar cost of the ticket, which is exactly the thing you are trying not to do. And even if they take the day off to click at 6am they aren't guaranteed to get a ticket because of everyone else clicking at 6am. There's always a cost

Well just to be clear, I didn’t say central planning would solve this problem. A careful reading of my post would show a distinct lack of the term “central planning”

You can be interested in market failures without proposing an alternative. Complex systems are fascinating and their boundaries and failure conditions are fascinating. That’s all I’m talking about.

Fair enough!

I also wanted to say that I appreciate your original reply and your civility. Sadly a rare thing these days.

People don't understand that the free market system is essentially a law of physics. You saying that a producer/seller of a limited good (in this case, space in a concert venue) cannot choose their own price is true, like it's also true that a person can't decide whether gravity pulls them down or not. You explained it pretty well yourself, the effect of supply and demand is unavoidable

I wonder though does it have to be limited. Like imagine I could make enough apples to fully satisfy the market demand for apples and I’m also willing to sell to anyone.

I want to sell those apples for $1 each. There’s plenty of apples to satisfy the demand. But let’s say that the market would bear a higher price, people would love to buy apples for $1 but due to a love of apples would be willing to pay up to $5.

In that scenario, the arbitrage opportunity still exists. Apple scalpers knowing that people would be willing to pay up to $5 would want to buy up lots of cheap apples and make the $4 profit that I’m leaving on the table for themselves.

And there’s just nothing we can do about it. I think we’d say that when the equilibrium price of $5 is met that the market is efficient but it’s a market where the producer of the good can fully satisfy the demand of the market for $X and yet the consumers have to pay $5X and this arbitragers get $4X.

It’s just interesting is all.

If you are able to perfectly meet demand why would anyone pay more than your price? What service or improvement are the arbitragers providing above and beyond what you are providing that incentivizes people to pay more than your price?

If you have 10,000 people willing to pay $X to see a concert, but you only have 5000 seats to sell at $X, not everyone is going to get a ticket.

Our economic system (arbitrage!) increases the price of the apple by $N until only one person is willing to buy that apple at $X+N.

If you make arbitrage illegal and implement a price ceiling at $X, one of two things will happen. If $N is greater than the cost of breaking the rules, people will start a black market to sell at $X+N (like in many communist countries). As mentioned in the article, this is already occurring with Ticketmaster because they take such a large tax on tickets; arbitrageurs are realizing they can avoid Ticketmaster's system by just sending around PDFs.

If $N is less than the cost of breaking the rules (Ticketmaster benefits from $N>$X), there will be shortages of seats because not everyone willing to pay $X for a seat can get one.

The market system works great when people who derive the most value from tickets are the ones who pay the most money. This works even better with arbitrage because people can just pay what they value the ticket at.

The market failure here is caused by wealth inequality, because there are people with unfathomable amounts of money who will pay tens of thousands of dollars to see a musician they sort of like.

Personally, I like how box seats deal with the problem. They have a high level of luxury that costs little to implement compared to price + is very scalable (you can stack boxes directly on top of each other and you're paying more to sit farther away!), and that's helping soak up a lot of demand.

Thanks for the thoughts they are also interesting.

Sorry I saw your comment after I wrote this reply to someone else, I’d be interested to hear your take on this hypothetical situation too if you don’t mind. https://news.ycombinator.com/item?id=40911779

I agree with you though about the idea that the market works well when those that receive the most value spend the most money. While we have very high rates of wealth inequality, which also seems to be something of an emergent property of this system, once you have even medium amounts of inequality the system becomes interesting. I think expanding on your thoughts it comes down to the relative value of money being different for different people. If I have $100 then $10 is a LOT of money, it’s 10% of all my money. If I have $1000 then $10 is probably not a lot of money to me, not trivial but it’s only 1%.

Now this is an order of magnitude but if you asked someone if a system where the wealthy had 10x as much money as the poor they’d probably say that the inequality wasn’t so bad. But even in that case the guy with $1000 would probably be willing to spend $11 on some good that the other guy wants maybe infinitely more, just because that guy can’t really afford it.

It’s a fascinating way of looking at things I hadn’t quite ever thought about in terms of relative value of money itself. I don’t have any real point I’m making here, just thanks for contributing I found your reply interesting and it made me think.