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Showing posts from June, 2017

Why do bands allow scalpers? (Hint: Dynamic Efficiency)

Mankiw recently posted about ticket prices and scalpers, and this reminded me that a while ago I thought of a reason why performers might allow some people to make so much money in their stead. It works more for music groups and football teams, but is more relevant for theater performances.

Say you are a music band who has just had a string of hits. You have two options: sell concert tickets for $60, in which case about half of them will go to lucky fans who have been following you since yours early days, and half will go to scalpers who will resell them for $500 to wall street traders that will use them to impress their dates. Or you can sell all of them for $400, and they will all go to wall street types.

It seems a no brainer, but what happens if the next album flops? In the first case, the guys that followed the band from the garage days will still go to the concerts to hear the old songs, and maybe your next effort has a better reception. Even if you never have another hit, you …