Is Ticket Scalping Bad? Part 2

So, I was told that my last entry is a little bland. Looking back over it, I suppose that’s true, but I still think it is interesting. So what do you do when your audience gets bored with your subject matter? You beat that dead horse until the sky falls down.
I want to explain, graphically, one more aspect of buying a scarce good (before I propose what I think is a better way to distribute concert tickets). Whether you are standing in line for a free show, or paying a premium for seats at an expensive venue, you are forfeiting capital (time, money, and energy). How much you are willing to forfeit is based on tons of stuff – too many things to address (how much you have, what day of the week it is on, how many times you’ve seen them before, what your friends are doing that night), blah blah blah. But essentially, it’s how bad you want to see she show.
Here’s where problems arise: if you would pay $37 to see, let’s say, Julian Casablancas, and tickets go on sale for $25, you might not get one because they are scarce. So wouldn’t it be better if the ticket went on sale at your maximum? That would be better than missing the concert, but not as good as seeing the concert for less than your maximum. The following is a perfect distribution of tickets:

Another thing worth pointing out is that your maximum forfeit is only your maximum – you would probably prefer to pay much less. That’s where feelings get hurt, and probably why my friend gets mad at scalpers. So when you look at the above chart, these are only potential customers’ maxima (ie.. everyone would pay $10 to see The Beatles, but the $10 line would only measure those that would, at most, pay $10 to see The Beatles).
So here is my proposal. This strategy would maximize the total revenue of the show, almost guarantee that every show is sold out, and ensure that everyone at least had the chance to buy a ticket. I would like to see a theater distribute tickets in the following way: On the first day, tickets go on sale for an exorbitant price that no one would pay, then they drop a little everyday until they run out, or the tickets reach a price that only covers the marginal cost.

This would be the perfect real world example of first degree price discrimination – maximizing the revenue by turning consumer surplus into revenue. It’s entirely efficient with no deadweight loss. The ‘problem’ with this, if there is one, is that you, the consumer, want to keep as much of your surplus (as far below your reservation price) as possible – you would have to balance your ticket price with the risk of missing the show, not to mention opportunity cost (what other show could you see for this price?).

I’m interested to hear if any of you have objections to this model.


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