If tickets for events like concerts with a face value of maybe $50 are known to be sold by scalpers for hundreds (or even thousands) of dollars, why don’t the venues themselves charge scalper-like prices? The demand is clearly there, especially when some events sell out in a matter of hours after tickets go on sale. Maybe they wouldn’t be able so sell out all seats at $1000 a piece, but they clearly could get away with charging much more.
Because fewer people would be able to afford the tickets. The number would probably be so small that the arena would lose money.
There is always someone willing to pay any price to get a ticket for their favorite artist (or thing – that’s the basic principle of eBay). But the number of people who are willing to pay $1000 for, say, the Rolling Stones, is fairly small. The arena may be able to sell 500 seats at that price, but they’re better off selling out 12,000 seats at $75.
The issue is setting the price to maximize the income. The more you charge, the fewer people who will be willing to pay that price and your attendance and gate go down. But if you charge too little, your income isn’t maximized. Ideally, you want to set the price so that the venue will be filled.
A scalper may be able to find a dozen people willing to meet his price, but the arena needs more than a dozen fans to make a profit.
This is actually being done already by Ticketmaster:
From fool.com
One word for that: Jerks.
Well, the first problem is that “scalper prices” range from thousands of dollars to below face value. I purchase tickets from scalpers all the time for professional sporting events and I almost always pay below face value. Of course, the scalpers are getting the tickets at one third the face value from season ticket holders who can’t make the game and will unload them for anything they can get, so the scalpers still make a profit.
However, as to the really expensive tickets, the economic concept the other posters have touched on is the concept of price discrimination. Price discrimination is the practice of selling a product to a buyer for the price the buyer is willing to pay. For instance, some people would be willing to pay $1 for a can of Coke, but would not pay $2. Some people who really like Coke would be willing to pay $2. If you could charge Person A $1 and Person B $2, you’d make three bucks, where if you charged $1 you’d only make two bucks and if you charged them both $2 you’d still only make two bucks. Obviously, price discrimination allows for much higher revenues and profits.
However, in most cases price discrimination is difficult or impossible to do. Charging different prices for retail goods is, for the most part, impossible; there’s too much infrastructure involved. And customers will obviously react very negatively to hear they’re being charged more than other people for the same commodity.
There are some forms of price discrimination being practiced but they’re oten well disguised. A good example is stereo equipment. The higher priced models are often just the lower priced models with a different faceplate and $50 worth of shiny features, but priced $500 higher because some people are willing to pay it.
And the most obvious type of price discrimination there is is the auction - a way of selling things that is deliberately structured to sell the item only to the one person who is willing to pay the highest price.
Ticket scalpers are price discrimination personified. Price discrimination at that scale is difficult for the original seller, (though as stpauler illustrates, they’re starting to catch on to the power of the Internet in using auctions to price discriminate.)
A good local example here is the Toronto Maple Leafs. The Leafs sell every ticket for every game before the season starts, and the prices range from $40 to $200. However, scalpers will sell the same tickets from a much wider range of prices; I’ve gone for as little as $20, and some tickets will run you $500 and up. Why?
Well, in addition to the points already made - if the Leafs tried to sell all the good tickets at $500 they’d infuriate the customers and drive fans away - there is also the issue of market information. It’s probably true that you could make a few more bucks with a wider price range, but the Leafs are selling all these tickets by the thousands a year in advance. Same goes for, say the Rolling Stones - they don’t want to have a staff of guys going to each city ahead of the band walking around dickering price. You’d spend more in hiring and paying salespeople than you’d ever make. It’s easier to just sell 'em all at predictable rates through Ticketmaster or the arena’s box office and pocket the money with relatively little fuss. They just don’t have the means or the time to dicker with every customer to determine the ideal price for each buyer.
Ticket scalpers, on the other hand, only deal with a few dozen tickets at a time and can gauge each customer for how much they can take them for - that’s why a good scalper will always ask you “How much d’ya wanna spend?”
A few hints for dealing with scalpers:
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Work in pairs, preferably a man and a woman. Play good cop/bad cop. One should engage the scalper, while the other should make a mild show (nothing too demonstrative or you look phony) of resisting the price. The “bad cop” should not speak with the scalper. You should try to get there early, too; I know it’s counterintuitive, but I always seem to find more pliable scalpers early.
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Never tell the scalper how much money you really have.
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Carry a diagram of the stadium or arena that shows the section numbers so you can immediately determine the quality of the tickets. Let the scalper see you referring to it.
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Scalpers like to talk loudly and quickly. They’re trying to intimidate you. Take your time; you should delberately try to slow the conversation down. Don’t be taken aback by how loudly they talk.
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The scalper will offer you a price. If it is higher than what you want to pay, say what you want to pay. Be assertive; insist you are willing to pay $X and nothing more, but be nice about it. You may want to claim that $X is all the money you have on you. If the scalper does offer you what you wanted to pay, offer less, by at least 20%.
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If the scalper caves on a really good offered price, great. If not, smile, say you don’t have that much and can’t spend it, and WALK AWAY. Four times out of five, he’ll call after you and offer you the tickets for your offered price.
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If he won’t cave, go to another scalper. They usually cooperate, but they all have differnt sets of tickets so one might have tickets you think are just as good for less money. Worse thing that can happen is you pay the same price.
I wonder if the buisiness model of low cost airlines could be applied to arena and stadium events? After all, both have a fixed number of seats, for use at a set time on a set date…could they not have a loss-leader £1 offer for the first 1000 online sales, and let the price gradually increase to balance this out?
I know they wouldn’t sell many tickets at $1000 each, but they could get away with charging much more than they already do. For example, a local concert’s tickets went on sale last Friday at 10am priced $45-75. When I checked at 2:30pm, it was already sold out. If they sell out in under 4.5 hours at that price point, then I think that there clearly is enough demand to sell tickets at higher prices, perhaps 2 or 3 times higher.
Even if they don’t sell out at the higher prices, there surely is a point that maximizes profits, if not capacity. Lets say they double the prices, but only sell 80% of the seats. They would still end up with 60% greater revenue. Maybe they could use an airline-type business model, where ticket prices would vary depending on availability and time of purchase.