I laughed a little when I read this article because it reminded me of my prof from my first econ class, who used the example of ticket scalping to teach about supply and demand. It’s just such perfect fodder for a curmudgeonly old econ prof.

The folly of the outraged parents is that they think scalpers somehow make people pay high prices. Of course, the scalpers (unless they have decided to become armed robbers) have not forced anyone to pay them anything. The trouble arose because the quantity of Hannah Montana tickets demanded at the the price set by promoters exceeded the quantity of tickets available for purchase. There was a shortage. Scalpers apparently anticipated this shortage very well, scooping up a large proportion of tickets moments after they became available. They are now eliminating the shortage by reselling the tickets at higher prices.

Perhaps there is a legitimate reason for concert goers’ dislike of scalpers; they trade with buyers differently than retailers do. We consumers are mostly accustomed to posted offer markets, like a grocery store where you cannot haggle over the price of bread. Certainly, that kind of market is much less stressful. Just think of buying a car, where the price is negotiable. For the seller, there are ups and downs to posted offer pricing — you cannot price discriminate as readily between the bargain hunters and the big spenders, but you save the time that would have been spent haggling. Apparently, most businesses selling less expensive items (not cars, houses) in the US today have found that posted offer pricing is on net good for their profits, judging by its ubiquity. In contrast, scalpers must have different incentives, so they engage in auctioning and haggling. Besides the added stress and time cost, this kind of pricing usually results in less value for the consumer, as the scalpers are able to price discriminate more than retailers.

I am guessing that posted offer pricing would probably be better for both buyers and sellers of Hannah Montana tickets. The reason that scalpers use other methods, I’m thinking, is that they are acting individually and aren’t organized into firms. I wonder why there aren’t any scalping firms?

Perhaps even more puzzling, why did the organizers of this tour decide to price the tickets so low? Maybe predicting demand for concert tours is difficult. If it is so difficult, it might be that an auction would be better than posted offer. Yet, I’ve never heard of tour promoters auctioning off the tickets to a concert. They must fear the antipathy from fans.