I think that the company doesn't know what price would maximize profits until _after_
the
show (or at the time of the show). A high price for, say, a concert that attracts few
customers would be a disaster. The concert hall-owner couldn't lower prices after the
fact
without alienating the customers that paid full price, while refunding a portion of the
price to those who paid full price would be impractical. The hall-owner sets prices to
maximize expected profits, while the scalpers take up the slack (and take the risk).
The
scalpers can cut prices at the time of the show without offending those who paid full
price. -- Jim Devine
> 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]
>
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