Nonsense. The higher price paid by and to scalpers reflects price
discrimination. It is only the few hardcore fans or people who need to buy
tickets on short notice that are willing pay the higher price. In theory,
ticket agencies could also reap these extra profits by charging a different
price to every consumer according to indvidual willingness-to-pay, but - 1]
blatant price discrimination is illegal, 2] they lack the informational
mechanisim to determine individual willingness to pay. Scalpers are able to
determine the latter through the extra-legal channel of selling hot tickets
at the venue where those with the highest willingness to pay are likely to
show up. This is so Econ 1 it is hard to believe your professor is serious.
But this probably only reflects the poverty of academic economics when it
comes to even elementary considerations of real market behavior.
By the way, I wouldn't be surprised is ticket agencies aren't trying to
figure out ways to increase their ability to exercise price discrimination
by collecting or purchasing information on individual performance tastes via
internet consumer surveys.
-----Original Message-----
From: Andrew Hagen [mailto:[EMAIL PROTECTED]]
Sent: Monday, March 19, 2001 7:34 PM
To: [EMAIL PROTECTED]
Subject: [PEN-L:9166] maximization?
A professor of mine started class today with an interesting question:
why don't ticketing companies raise prices to the level that the market
will bear? Often these companies hold a monopoly in selling tickets to
all events at a particular venue. Currently the event ticket market can
bear higher prices, as evinced by the higher prices paid to scalpers,
AKA the secondary market. It's apparent that raising prices would
maximize profits in the primary ticket market. Why don't they do so? My
professor's proposed answer was: companies do not want to maximize
their profits; they only want what they perceive as a reasonable return
on their investment. It seems to me like a plausible assertion.
Could someone point me toward an article or book that questions the
maximization assumption?
Thanks,
Andrew Hagen
[EMAIL PROTECTED]
