Ticket Pricing and Scalping: A Game Theoretical Approach

Nelson Sa and Turkay Evsen ()
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Turkay Evsen: Department of Economics, Vassar College, 124 Raymond Ave., Poughkeepsie, NY 12603, USA

The B.E. Journal of Economic Analysis & Policy, 2013, vol. 13, issue 2, 627-653

Abstract: Ticket scalping is frequently related to the economic puzzle of underpricing by promoters. It is also disputed whether event promoters benefit from scalper participation or not. Our article explores two questions: can promoters benefit from scalpers’ activities and what are the resulting consumer welfare effects? We address these questions by developing a three period game where the secondary market is supported by an auction mechanism, interacting with primary market decisions. We find that participation by scalpers can lead to underpricing in the primary market and that this may benefit small or credit-constrained promoters. This requires the scalper’s discount factor to be higher than the promoter’s discount factor. The necessary premium on the discount factor increases with the fraction of early buyers and decreases with market size. Finally, the effect of scalper participation on aggregate consumer welfare is shown to be positive for a large enough market size or discount rate for the scalper.

Keywords: secondary markets; scalping; ticket pricing; consumer welfare (search for similar items in EconPapers)
Date: 2013
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DOI: 10.1515/bejeap-2013-0042

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