Economists missing the point

Professor Mark Perry discusses the underpriced Garth Brooks tickets in order to make a basic economic point. When the price is below the clearing price of demand at that specified quantity the tickets will sell out quickly. Increasing the price or quantity will alleviate the supposed shortage. But that isn't the whole story.

The problem is actually more about resellers than most economists would like to think. The preference of the artist isn't to price the tickets where markets clear and they can maximize their profits. The idea is to give their fans a large consumer surplus and to create buzz around the show to help them sell out future shows. This could be because the artists are trying to appear altruistic to their fans or merely because the artists want to make sure their fans keep coming back. If a concert was just barely worth the combined price of the ticket and inconvenience of attending for a majority of their fans the artist wouldn't have long term staying power. A popular restaurant that raises their prices by too much can go from having lines out the door each night to being empty, there is no easily identifiable middle ground.

The problem is that current institutions allow resellers to capture a large percentage of this consumer surplus by buying up most of the tickets and selling them on ticket reselling sites.  So the challenge is for the artists to set up institutions that reduce the resale value of the tickets. There are various ways that the promoters can make it more likely that the difference in value between the price that the tickets are sold at and the market price goes to consumer surplus of fans rather than ticket resellers.

One method that is starting to be used is to only allow for small ticket purchases and to require that the person with the credit card shows up to pick up the ticket and goes directly into the show with their guest. At the very least, it reduces the premium to the reseller who actually has to drive and show up to the show in order to get their customers inside.

Another option would be to have a lottery for their fans, making each fan give a valid non-PO box address. The random winners would be given the option to buy tickets at the lower price. The tickets would be tied to the ID of the winner and that person would have to be the one to enter the concert.  The ticket could only be resold back to the promoter to give the buyer some optionality but to prevent the secondary market.

Eventually the technology to track purchases should be available and the large ticket resellers will have the potential to be stopped. The issue here is whether or not artists and promoters actually want to give their fans a high consumer surplus or just want to look like that's what they are trying to do while capturing most of it. A significant portion of the extra charge by Ticket-master goes directly to the promoters and artists who want to look like they are offering a lower ticket price and that Ticket-master is the greedy corporation. 

More generally, the relationship between an artist and their fans isn't always a market relationship where the artist is attempting to maximize profits. At the very least, there are social norms that most artists are trying to follow where they want to appear to be trying to give their fans large consumer surpluses and this approach should maximize profits in the long run by increasing the artist's popularity. It's from these social norms that the market inefficiencies exploited by resellers are created. But if the promoters and artists change the nature of what a ticket is, there are ways that artists can supply tickets to their shows that at the very least significantly reduce the problem and profits of resellers.