Friday, February 19, 2010

Scalpers Selling Olympic Tickets for Less Than Face Value: Is That Predatory Pricing or Ticket Dumping?

SEATTLE TIMES -- "Jeff Antush, left, and his wife, Heidi, third from left, bought four tickets from a scalper for the U.S. vs. Norway men's hockey game. They paid only $100 but face value totaled $560. Daughters Allison, 7, left, and Lauren, 9, enjoy the game."

MP: Hey, wait a minute. If they paid a ticket "scalper" less than face value for those tickets, wouldn't that be "predatory ticket pricing," "ticket dumping" or "reverse ticket scalping?" Didn't the ticket buyers kind of "scalp" the "scalper" in this transaction?

Update: The fact that the "ticket scalpers" were selling tickets below face value demonstrates that they too ultimately are at the mercy of the laws of supply and demand, which are not optional. That would suggest that it is more accurate to refer them as "ticket brokers," and not as "ticket scalpers."

The very existence of ticket brokers generally relies on an active secondary market for tickets that basically exists almost exclusively because tickets are so frequently underpriced, which creates an artificial ticket shortage. But there is risk involved for the ticket brokers,due to the uncertainties of the market, weather, etc. Although they most often sell tickets above face value, they also sometimes sell at face value or below face value, depending on market forces, i.e. supply and demand.

24 Comments:

At 2/19/2010 10:39 PM, Anonymous Anonymous said...

Deflation ;-)

 
At 2/20/2010 12:13 AM, Blogger bobble said...

i dunno prof perry. i'm no economist but i think that "ticket dumping" would only apply to the producer of the tickets, not an intermediary.

 
At 2/20/2010 1:02 AM, Blogger Mark J. Perry said...

The brokers ("scalpers") who bought the tickets are now the suppliers or producers of the product. Assuming they bought them at face value, they are then "dumping" them on the market for less than face value. The buyers benefit from the cost savings, and wouldn't think of complaining about their good fortune.

Similarly, when a foreign producer (or broker) is accused of "dumping" for selling Americans products below face value, we should never think of complaining about it, but should be thankful that the foreign producers are subsidizing our good fortune.

 
At 2/20/2010 1:28 AM, Blogger bobble said...

MP:"The brokers ("scalpers") who bought the tickets are now the suppliers or producers of the product."

well, you're the econ phd, but i don't buy it.

from wikpedia: dumping is defined as the act of a manufacturer in one country exporting a product to another country at a price which is either below the price it charges in its home market or is below its costs of production."

how can an intermediary be construed as a manufacturer?

 
At 2/20/2010 2:14 AM, Blogger ruddyturnstone said...

"The brokers (scalpers) who bought the tickets are now the suppliers or producers of the product. Assuming they bought them at face value, they are then "dumping" them on the market for less than face value. The buyers benefit from the cost savings, and wouldn't think of complaining about their good fortune."

Yes.

"Similarly, when a foreign producer (or broker) is accused of "dumping" for selling Americans products below face value, we should never think of complaining about it, but should be thankful that the foreign producers are subsidizing our good fortune."

Non sequitor.

In the first case, the complainer/non complainer is the buyer, but in the second case it is "we." Of course, the consumer of a product never complains about a low price. But the "we" in the second case is not merely a consumer, or even "the American consumer." The "we" here are Americans generally. Or America as a polity or an economy or a socidety. As a whole. And, as such, this "we" can, and does, have other concerns besides merely having consumers, even its own consumers, getting the lowest price possible. For example, if manufactured or agricultural goods are "dumped" on our country and its economy, that probably means that those sectors are harmed in America. And, "we" are manufacturers and farmers, as well as consumers. And, our polity and country might have an interest in having viable domestic industries and farms. In other words, "our" interests are more complex and varied than that of mere individual consumenrs.

Of course, there are counter arguments about specialization and efficiencies and so on. Buuuuuut, those are beyond the simple, not to say simplistic,analogy you are trying to make.

Additionally, there is no domestic production at issue at all in the first case, as tickets to this years'Olympics can't be produced in America, but only Canada. It is not as if, by reducing the ticket prices in Vancouver, our, American "Olympics" in Seattle or anywhere else in the USA are being undercut. The most you could possibly say, and it is a huge stretch, is that cheaper Olympics tickets might convince a few marginal tourists to go to Vancouver instead of somewhere in the USA. But given the practical difficulties involved (getting hotel rooms, rental cars, flights in and out of Vancouver at this late date), that seems pretty chimerical.

 
At 2/20/2010 8:00 AM, Blogger Mark J. Perry said...

I was having a little fun with the headline and the post. If you don't buy the "dumping" argument, stick with "predatory" pricing. Both are selling below cost, and both benefit the buyer, that was the point I was trying to make.

Here's one definition:

In economics, "dumping" can refer to any kind of predatory pricing. However, the word is now generally used only in the context of international trade law, where dumping is defined as the act of a manufacturer in one country exporting a product to another country at a price which is either below the price it charges in its home market or is below its costs of production. The term has a negative connotation, but advocates of free markets see "dumping" as beneficial for consumers and believe that protectionism to prevent it would have net negative consequences.

 
At 2/20/2010 11:05 AM, Anonymous gettingrational said...

The NHL Vancouver Canucks sell individual tickets from $55 to $131.50 a piece in Canadian dollars (just about the same as U.S.). All the games are usually sold out. I am going to guess that street bought tickets are even more.

It appears the Olympic pricing officials tried price at premium NHL seat rates. Maybe I will take in a game since the market has taken down the elite price status.

BTW the Vancouver Canucks are on a 17 game road trip since their venue has been temporaraily confiscated.

 
At 2/20/2010 11:36 AM, Anonymous morganovich said...

i think you're reaching on this one dr perry.

dumping is selling below cost to maintain market share.

this is called "taking a bath".

by your logic, a home buyer who sells at a loss would be dumping. ditto an equity trader. that's just silly.

scalpers are speculators and speculators in very risky assets.

the best analogy is options (as a ticket is an option to go to an event at a certain time). they are wasting assets. the day after the game, they are worth nothing.

like options, all else equal, the "fair" price of tickets should decline as an event approaches unless there is a scarcity issue (akin to being in the money on a strike price). scalpers are betting on a sell out to reap outsized profit. if they fail to get one, then they tend to lose money unless they bought very cheaply. i used to live about 3 blocks from the ballpark in SF and we would walk over in the second inning and routinely get great seats for 10-20% of face from guys who just wanted to get anything they could for the tickets and go home.

a scalper selling below cost is just trying to minimize losses.

that's not dumping and more than selling a house you are underwater in is.

if a venue wants to stop cut price scalping, it's very easy to do: make all tickets redeemable at the box office for face value.

bang. no more cut rate sellers.

but that's probably not a profit maximizing strategy. why take the hit yourself when you can have a scalper do it?

 
At 2/20/2010 2:38 PM, Blogger Mark J. Perry said...

I don't agree that any of the terms are really valid: ticket scalping (price above face), predatory pricing (price below cost), or dumping (price below cost). They are all non-economic, political, arbitrary, asbsurd and bureaucratic terms for prices, so I was just having some fun with the post and the absurd pricing terms.

Many people object to selling a ticket above face value and call it a scalping, and in some cases make it illegal. I don't call it ticket scalping, I call it a market price voluntarily agreed upon between a willing buyer and willing seller.

So now that the "scalpers" are selling tickets below face value, they really can't be scalping tickets can they, since the definition of scalping is a price > face value. Maybe it should be called "reverse scalping," and the buyers should be charged with a crime for taking advantage of the scalper?

So it's all absurd: predatory pricing, dumping, and scalping; these are just artificial determinations that some prices are "bad" in some way. I don't agree. Why should a price above face be criminal, but a price below face value not be? It's all totally absurd and arbitrary and non-sensical.

So since all of the defintions are arbritary and absurd, it's not sensisble to discuss the specific meanings and details of absurd and arbitrary terms. The point of the post was point out the absurdity of ticket scalping. Sorry that I didn't make that clear enough.

 
At 2/20/2010 4:00 PM, Blogger OA said...

If ticket dumping by scalpers isn't a good comparison to dumping, when was the last good example of real dumping to compare against?

Last claim I can remember is the Chinese tires from last year. For which my understanding is the tire sizes at issue were basically trended out of by domestic producers because they weren't profitable. And unless I'm mistaken there wasn't even a claim of subsidies in that case.

Other than that, I can recall sugar, which notably isn't usually bought directly from the sugar processor, but through some broker, exporter, etc. (Does the seller relationship to the source really matter?) With US prices about double the world price, just about any other source in the world would be "dumping". Although I'm sure any outside source would gladly take the non-dumping price.

I also recall something about steel dumping during the Bush era. Can't remember the details, but odds are it didn't change the fundamentals of the steel industry as the tariffs soon went away.

 
At 2/20/2010 8:02 PM, Anonymous Craig said...

In other words, "our" interests are more complex and varied than that of mere individual consumenrs.

"Mere" individual consumers?

There are 300,000,000 of us "mere" individual consumers in America. At some point our "mere" individual preferences become a rather important data point. Dare I say that it becomes "our" interest?

 
At 2/20/2010 9:24 PM, Blogger ruddyturnstone said...

"'Mere' individual consumers? There are 300,000,000 of us 'mere' individual consumers in America. At some point our "mere" individual preferences become a rather important data point. Dare I say that it becomes 'our' interest?"

I wouldn't. B/c "we" are 300,000,000 producers too. "We" have interests in that regard as well. Also, "we" are a polity, a unit. Abd that unit also has interests beyond those of individual consumers AND of consumers considered cumulatively.

"I was having a little fun with the headline and the post."

Translation: You are not willing to defend your comparison. If no one objected, you would treat it as valid, if someone does object, you say it was all a joke. Heads you win, tails you don't lose.

 
At 2/20/2010 9:32 PM, Blogger ruddyturnstone said...

"If you don't buy the 'dumping' argument, stick with 'predatory' pricing. Both are selling below cost, and both benefit the buyer, that was the point I was trying to make."

Well, then you made it badly. And your point is trivial, obvious and uncontested anyway. Of course lower prices are always "benefit the buyer." Who ever argues otherwise? Strawman much, professor?

The real question is whether there are other interests that a country has that are hurt by "dumping" or "predatory pricing." Of course, there are sophisticated argunments and counterarguments for both sides. But no one ever criticizes predatory pricing or dumping on the grounds that it doesn't benefit the consumer, at least in the short run. And it is intellectualy dishonest to pretend otherwise.

 
At 2/20/2010 9:39 PM, Blogger ruddyturnstone said...

"The term has a negative connotation, but advocates of free markets see 'dumping' as beneficial for consumers and believe that protectionism to prevent it would have net negative consequences."

Yes, free market advocates "believe" that. But that belief is hardly vindicated simply by pointing out the obvious. Namely, that lower prices benefit consumers.

 
At 2/20/2010 11:59 PM, Anonymous EscapedWestOfTheBigMuddy said...

I'm with morganovich here. The only ones taking a concrete loss here are the scalpers.

There may also be people who tried to buy tickets direct and couldn't get them who subsequently got out of the market and lost their chance to attend; and they are down the opportunity. The flip side of that is the people who joined the market late and none-the-less got in on the cheep.

 
At 2/21/2010 9:04 PM, Blogger Ron H. said...

ruddyturnstone,

Thanks for your help with the definition of the word "we". I never imagined it could mean so many things in a short, simple comment.

I naively assumed that the "we" Dr. Perry used in the second part of his comment referred to "we" as in "you and I", or perhape "we, the buyers".

To paraphrase B. Clinton: I guess that depends on what the meaning of the word "we" is.

I'm sure that in the future, Dr.
Perry will much more careful when he uses such slippery words.

You seem pretty angry about the concept of "dumping" or selling below cost. I sense that your anger is directed at those that "dump". If that is the case, you might consider redirecting it toward "we", the buyers. After all, without enlisting government help, no seller can force us (buyers) to do anything. We (buyers) are guilty of voluntarily buying at below cost for our own selfish reasons, to the detriment of sellers who charge more. We (buyers) could chose to do the right thing by insisting on paying the higher price, but in my experience, we seldom do. So, we (buyers) are the ones you should blame.

By the way, this concept of "Free To Chose" sounds like a great title for a book, and if anyone named Friedman were to write one, I would highly recommend it to everyone.

 
At 2/21/2010 10:21 PM, Blogger ruddyturnstone said...

"Blah, blah, blah... I naively assumed that the 'we' Dr. Perry used in the second part of his comment referred to 'we' as in 'you and I,' or perhape 'we, the buyers.' To paraphrase B. Clinton: I guess that depends on what the meaning of the word 'we' is...I sense that your anger is directed at those that 'dump'...Milton Freidman..."

I'll stand by my definition of "we" as used in the prof's comment:

"Similarly, when a foreign producer (or broker) is accused of 'dumping' for selling Americans products below face value, we should never think of complaining about it, but should be thankful that the foreign producers are subsidizing our good fortune."

Nothing about "we" meaning "you and I' or "we the buyers." No, the context is that of America, or Americans, as a whole. And "we" Americans are not simply consumers. We are producers too. And we are members of a polity, a nation.

As for Mr. Friedman, as I said, this a complicated issue, with economists making sophisticated arguments on both sides of the issue, and taking into account that there are interests at stake besides those of consumers getting the lowest price. And, although it might come as a shock to you, some of those economists actually disagree with Mr. Friedman on a point or two.

And, if you had my posts carefully, I did not indicate that I had an objection to dumping, but merely to presenting the issue in a one-sided, strawman way.

But you go right ahead with YOUR "Clintonian" explanations, faux "naive" assumption and lame appeals to authority.

 
At 2/22/2010 12:34 AM, Blogger Ron H. said...

Ruddy, you are right. Dr. Perry DID refer to Americans in his comment before using the word "we", so we (you and I) can at least agree on that use.

You have made a really big deal out what seems like a fairly simple post about selling tickets below cost, and a comment about selling below cost internationally.
You say you have not indicated an objection to dumping, and indeed, you haven't. So, DO you, or DON'T you object to dumping? If you do, then please make your case instead of just saying "it's complicated". If you don't object, then just what IS your point?

You refer to "specialization and efficiencies". Are you referring to comparative or absolute advantage as it relates to division of labor here?

You didn't address my comment about buyers being the ones harming higher priced sellers.

My reference to Dr. Friedman wasn't actually an appeal to authority, it was my gentle suggestion that you get more economic education before you make comments on economics blogs as you have here. "Free to Choose" is an excellent place to start.

 
At 2/22/2010 1:42 AM, Blogger ruddyturnstone said...

"Ruddy, you are right. Dr. Perry DID refer to Americans in his comment before using the word "we", so we (you and I) can at least agree on that use."

Thank you for admitting that I am right. So, I guess that means all that business about "Clintonian" definitions and "naive" assumptions was also in error,if not also in bad faith to begin with.

"You have made a really big deal out what seems like a fairly simple post about selling tickets below cost, and a comment about selling below cost internationally."

No, what I have made a "fairly big deal" out of his the use of a strawman argument. I don't like it, and it seems to me that this kind of fallacy, and others, are not uncommon on this blog. What you are describing is simply the occasion for my complaint.

"You say you have not indicated an objection to dumping, and indeed, you haven't."

Yes, I am right about that too. Thank you again for admitting it. I guess that means you are also admitting that your claimed "sensing" otherwise was in error.

"So, DO you, or DON'T you object to dumping?"

Who are you, Mike Wallace? Am I on the witness stand? No. So why do you think I am required to answer your "yes" or "no" questions?

"If you do, then please make your case instead of just saying 'it's complicated.' If you don't object, then just what IS your point?"

Again, I am neither objecting nor agreeing with a pro dumping viewpoiont. That was not the point of my post. The point, as should be obvious to you, was that the issue IS complicated, and that to couch it in terms merely of the lower prices enjoyed by consumers is to simplify grotesquely. And, to imply that opponents of dumping do so because they either are not aware of or don't believe that it results in lower prices is intellectually dishonest. Opponents of dumping, as our host well knows, rely on countervailing interests to provide their rationale, despite the lowered prices. I have pointed this out several times already. Why it is not clear to you is beyond me.

I don't HAVE to state my positon on dumping to make that point. And, quite frankly, because it is a complicated and nuanced subject, I hardly think the comment section of a blog is the place to debate it. Furthermore, even if I were tempted take up your offer, my internet experience tells me it wouldn't be worth the effort. Because, if I were to take a position contrary to the Free Trade dogma, I would be swarmed, given the nature of this particular blog. A wise woman once told me that "you can't woo the board." The comments section of a Free Trade board is NOT the place to try prove that Free Trade theory is in error. But, if I were to take the contary position, and defend Free Trade theory, I would merely be preaching to the choir.

No. I prefer to mostly sit on the sidelines here, and jump in only when I think the prof or one of the commenters has made a clear error, even if only a relatively minor one. If that's OK with you.

"My reference to Dr. Friedman wasn't actually an appeal to authority, it was my gentle suggestion that you get more economic education before you make comments on economics blogs as you have here."

No, I don't think so. It was either an appeal to authority or it was a blatant attempt at condescension. Which is what you are doing now. And that is kind of funny, since you now admit that my central objection to the prof's comment was correct. I guess my education is just fine as it is. I thank you, though, for your no doubt heartfelt expression of concern on my behalf.

 
At 2/22/2010 4:13 AM, Blogger Ron H. said...

So, ruddy, are you saying you are just a troll here? If so, you aren't doing a very good job. You haven't drawn anyone out except me, & I'm having a good time with this.

Do you not realize when you are being ridiculed?

There's no straw man here on this thread, and no appeal to authority.
If you are going to refer to such fallacies, you need to understand what they mean, and use them in the correct context. I have provided a link for you.

http://www.nizkor.org/features/fallacies/

 
At 2/22/2010 5:08 AM, Blogger ruddyturnstone said...

"So, ruddy, are you saying you are just a troll here?"

No, I am doing just what I said I was: picking my spots and adding my two cents only when I think it warranted.

Perhaps you are here "to buy an argument" on this comments thread about dumping or some other weighty topic, but it is not my responsibility to sell you one.

"If so, you aren't doing a very good job. You haven't drawn anyone out except me, & I'm having a good time with this."

As that's not what I am doing, your evaluation doesn't apply. I am not looking to draw anyone out, and directed my comments solely to the blogger, until you intervened. I am glad you are having a good time, but, unless you have something to say about the point I was making (which I assume by now that even you "get"), I will not play anymore. So, you see, you are really playing the part of a troll here, not me.

"Do you not realize when you are being ridiculed?"

Does that mean you really weren't sincerely concerned about bettering my education? How dissapointing. But I did mention before that you were being condescending. So, in answer to your question, yes, I do know when someone is ATTEMPTING to ridicule me. By the way, isn't trying to ridicule other posters something that trolls do?

"There's no straw man here on this thread, and no appeal to authority."

I think there were and pointed them out. Your simple denial thereof is not persuasive, or even interesting.

"If you are going to refer to such fallacies, you need to understand what they mean, and use them in the correct context. I have provided a link for you..."

Thanks anyway, as I already understand what they mean and have used them correctly. And thanks also for the additional condescension and ridicule. It really speaks well of you.

 
At 2/22/2010 7:51 AM, Anonymous geoih said...

Quote from ruddyturnstone: "The "we" here are Americans generally. Or America as a polity or an economy or a socidety. As a whole."

Your premise is flawed. There is no "we". It only exists as a fiction in you mind. Just the few people on this blog who have opposite opinions about this topic is proof that there is no "we".

 
At 2/22/2010 10:12 PM, Blogger ruddyturnstone said...

"Your premise is flawed. There is no 'we.' It only exists as a fiction in you mind. Just the few people on this blog who have opposite opinions about this topic is proof that there is no 'we.'"

I think not. The USA is not a "fiction" in my mind. It is, as I said, a polity, a nation. That various members of the polity have differing opinions doesn't change that.

Anyway, it was the blogger who first used the term "Americans," and used it as a predicate for the pronoun "we."

 
At 2/23/2010 6:45 PM, Anonymous 401k plan said...

I am pro to the ticket dumping.

 

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