Wednesday, February 28, 2007

Tickets and Surplus

In purchasing tickets for Spring Training Red Sox games, I'm experiencing firsthand the poor allocation of surplus that occurs in many ticket markets. Whereas the Red Sox have been selling out home games for years, and have therefore developed a reasonable system of random allocations. In most markets, however, ticket resellers have clever methods: they let the team market low-demand games at given prices, but they buy up the tickets to high-demand games, and resell them at market value, which is often two or three times the original price.

Never mind that this is flagrant corporate scalping (there's nothing economically wrong with that), but there's no reason that the team or its fans should have to share the surplus of their transaction with middlemen.

I'm not a mechanism-design theorist (as some of my colleagues are), but even I know that there are simple, efficient mechanisms for selling tickets. The most obvious of these is auctions: let fans pay whatever they're willing to pay for game tickets. Inefficiencies will arise with the timing of the auction, but not too much inefficiency. There are probably better mechanisms (and somebody has probably proven this already), but for now, team owners just thinking about it would be an improvement.

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