Wednesday, December 15, 2010

Bowl Game Economics - Scalping Tickets

Last Friday, Mark Perry at Carpe Diem had a post that can be useful to those teaching about prices and markets.  Mark pointed to a rant by a University of Wisconsin student and football fan. The individual was upset because he or she did not get a ticket for the upcoming Rose Bowl game in Pasadena when they went on sale.  The ticket allotment for students through the University of Wisconsin quickly sold out.  So far, so good - we have an example of supply and demand at a price.  We can use it to illustrate consumer and producer surplus in a market with inelastic supply.

What happened shortly after the tickets sold out was the cause of the rant.  Within a few hours, tickets were becoming available on social networking sites (probably even on eBay and other e-commerce sites). And the price was considerably higher than face value.  Some students had purchased the tickets and were now selling them at a considerable premium.

Now we can integrate willingness to pay, inefficient markets, elasticity of supply and demand (remember timeliness can be a factor), budget constraints, and utility/value. Clearly, some people were willing to pay a higher price, but their opportunity cost may have prevented them from going through regular channels.  They may place a different value on being at the game and or have different budget constraints. There are a lot of different directions to go with this, and I welcome additional ideas or suggestions for sharing with the rest of the readers.

As a supplement, I point you to this excellent interview on the EconTalk web site featuring a discussion between host Russ Roberts and Duke University Professor Mike Munger, both big baseball fans, as they discuss the economics of ticket-scalping. I welcome your comments.

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