Economics and the mid-life crisis have much in common: Both dwell on foregone opportunities

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Friday, October 21, 2005

Legalized Scalping

In our Radioeconomics discussion about the World Series this morning, King Banaian, Phil Miller, and I discussed ticket scalping at the outset. In an earlier posting, Skip Sauer noted that there have been reports from the Chicago Tribune that Chicago tickets to the World Series with face values roughly between $125 and $200 have been resold for between $515 and $7500, depending on the location of the seats.

After our podcast discussion (but probably unrelated to it), one of Skip's friends sent him this story from the WSJ online. It turns out that reselling tickets is legal in many states, and with varying regulations on the resellers and the prices they are allowed to charge.

One Illinois provision was passed in May when White Sox fans could only dare to dream about a World Series berth for the first time since 1959. It lifted the ban on nonlicensed individuals reselling event tickets online for more than face value.
The effect of this de-regulation of the aftermarket has been to increase the supply of tickets on the legal market, with the expectation that, ceteris paribus, prices would drop somewhat.

The new laws could mean that prices for resold tickets for other events such as concerts and theater performances could fall too as a greater number of sellers post tickets online.
At the same time, knowing that one can buy scalped tickets legally has increased the demand. The net effect on prices is difficult to predict and assess.

But online ticket resellers continue to report frenzied business. StubHub, based in San Francisco, says the number of White Sox tickets sold on its site the day the team clinched the American League championship was 57% higher than the number of Red Sox tickets sold when Boston won a spot in the World Series last year.

Online ticket reseller RazorGator reports a 50% increase in traffic overall. "The change in the law opened up a whole new piece of the market," says David Lord, the Beverly Hills-based company's president and chief executive.
The article makes a concluding point that emphasizes the importance of reputation: counterfeit sales may become an increasing problem, especially with personal sales on-line between people who do not know each other.
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