Primary-Market Auctions for Event Tickets: Eliminating the Rents of 'Bob the Broker'?

Abstract

Economists have long been puzzled by event-ticket underpricing: underpricing both reduces revenue and encourages socially wasteful rent-seeking by ticket brokers. This paper studies the introduction of auctions into this market by Ticketmaster. We first show theoretically that Ticketmaster's auction design, a novel variant of position auctions, has attractive efficiency, revenue and no-arbitrage properties. Then, by combining primary-market auction data from Ticketmaster with secondary-market resale value data from eBay, we show that the auctions "worked" in practice: on average, they eliminated the arbitrage profits associated with underpriced tickets. We conclude by discussing why, nevertheless, the auctions have failed to take off. "It is nevertheless true that gangs of hardened ticket speculators exist and carry on their atrocious trade with perfect shamelessness."-New York Times Editorial (1876).

Reference‐price shifts and customer antagonism: Evidence from reviews for online auctions

“…They attribute their results to the search costs necessary to make a good deal in an auction, relative to the convenience of fixed‐price offers. Similarly, Bhave and Budish (2017) show that auctions did not persist as an online sales mechanism for event tickets, even though they cleared the market and prevented speculation much more effectively than fixed prices. In line with these observations, this paper shows how not only buyers but also the seller suffers directly from using an auction when buyers undersearch and then punish the seller for their (perceived) losses.…”

“…1717The same sequential sales strategy, though not motivated by profit‐seeking concerns, can also be employed to prevent (ticket‐)scalping (Bhave & Budish, 2017; Courty, 2003; Leslie & Sorensen, 2014; Roth, 2007). …”