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).

The Black Market for Beijing License Plates

“…In the model, trades take place between a selection of buyers with particularly high valuations and sellers with particularly low valuations. This pattern is consistent with the literature on the resale market of tickets where trades are observed (Bhave and Budish, 2018;Leslie and Sorensen, 2013) and where search costs are relatively small.…”

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

“…However, all these nine reviews were in fact positive.14 Specifically, the scenario featured the information that the email with the voucher code had not arrived by email 3 days after the auction had ended causing some anxiety over whether voucher would arrive soon enough for its intended use. The scenario also stated that after one had reached out to the seller, the voucher was received within 1 day.15 This resulted in n = 95/104/99 observations for the treatments with the higher/same/lower price.16 It is also consistent with the findings byBartling et al (2017) and the notion that reviewing customers antagonism is not driven by distributional preferences with respect to a specific seller who benefited from the higher price in the auction.17 The 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).18 eBay has tried to prevent such feedback by making it clear that before buyers give a "neutral or negative feedback, they should contact the seller and try to resolve problems" and that such feedback should be "fair and objective" (eBay.de's feedback rules, retrieved and translated from http://pages.ebay.de/help/feedback/howitworks.html at 09.02.2009).19 More details on the used software packages in the Python script, which is part of the paper's data package.20 Maximal p values from using either all observations or only each buyer's first review (independent observations).…”

“…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.…”

Efficient pricing of Bordeaux en primeur wines

“…Too high a price, on the other hand, is likely to reduce the volume sold and negatively affect the reputation of both the issuer and the intermediary/ broker. This risk of underselling and reputational damage explains why the literature finds that release prices are almost systematically too low for many assets (stocks and bonds in a financial context (Ljungqvist, 2007;Ritter and Welch, 2002), but also tickets for sports and entertainment events (Bhave and Budish, 2017;Courty, 2000Courty, , 2003).…”