<p>There is a good <a href="http://www.npr.org/sections/money/2013/06/27/196277836/kid-rock-takes-on-the-scalpers">Planet Money episode</a> on ticket scalping; I recommend it.</p>

<p>The reason for banning ticket scalping has nothing to do with economic harm, and everything to do with making the arts (or sports, whatever) accessible to people of more-modest means. Consider the fact that artists could, if they wanted, just auction off all the seats to their shows, capturing all the surplus and putting scalpers out of business.* </p>

<p>If artists did this, however, lots of people wouldn't be able to afford to see popular artists perform. Many artists (the Planet Money episode uses Kid Rock as an example) want to try to make sure that their fans have a reasonable shot at attending, which means that they want to price the tickets low... but the only way this can work is if resale is illegal.</p>

<p><a href="http://www.nytimes.com/2013/06/09/magazine/the-secret-science-of-scalping-tickets.html">It's been suggested</a> that artists (again, the same goes for sports teams) might benefit from making low-priced tickets available to fans for two reasons: because they plan on selling stuff to people once they're inside, and because an artist-fan relationship is hopefully not just a one-shot transaction. The idea is that fans who can attend the occasional show might be more likely to buy recordings, merchandise, and tickets in the future, providing the sort of long-running support that can keep an artist viable over many years.</p>

<blockquote>
  <p>[P]erformers who undercharge their fans can paradoxically reap higher profits than those who maximize each ticket price. It’s a strategy similar to the one employed by ventures like casinos and cruise ships, which take a hit on admission prices but make their money once the customers are inside. Concert promoters can overcharge on everything from beer sales to T-shirts, and the benefits of low-priced tickets can accrue significantly over the years as loyal fans return.</p>
</blockquote>

<p>*For the most part— there's some amount of resale that is sort of frictional, which arises from people not being able to attend a show and unloading tickets so they don't just eat the full cost, etc.</p>

CC BY-SA 3.0
2017-02-28T15:23:49.840Z
Dismal science, why not artists sell tickets online but then don't choose all highest bidders?
BCLC
CC BY-SA 3.0
2017-03-01T13:18:08.187Z
@BCLC They sometimes do that if they're concerned about scalping. One technique is to limit the number of tickets one person can buy and check IDs against tickets at the door (strictly prohibiting resale).
dismalscience
CC BY-SA 3.0
2017-03-02T00:38:01.297Z
dismalscience, so why don't they just do that?
BCLC
CC BY-SA 3.0
2017-03-02T01:16:18.530Z
@BCLC Some do. When Neutral Milk Hotel reunited, that's exactly what they did. But it's harder on both venues, who have to enforce it, and fans who have something come up after buying tickets and can't even hand them to a friend for free, so it works best if you have an intense fan base and are playing at smaller venues. It's not a great solution for all shows.
dismalscience
CC BY-SA 3.0
2015-07-17T07:11:43.953Z
See this blog post for some more accounts of artists who don't want to be seen ripping-off their fans: http://cheaptalk.org/2010/06/03/ticket-scalping-why-is-neil-diamond-worth-so-much/
Ubiquitous
CC BY-SA 3.0
2015-07-17T13:46:44.210Z
If artists want to sell stuff to customers once they're inside, I dont see why they wouldnt want to select the richest fans as customers.
FooBar
CC BY-SA 3.0
2015-07-17T13:49:27.033Z
The comparison with casinos doesnt hold: Additional seating in casinos (or, creating additional casino seating/area) is cheap, while the same is not true for limited space in a stadium for any given artist.
FooBar
CC BY-SA 3.0
2015-07-17T14:18:42.773Z
@FooBar It's not about the ability to expand capacity to *more* customers (which anyway *always* has a marginal cost), it's about the risk of *excess* capacity. If a casino prices admission too high, they end up with empty seats which are taking no money, but still costing floor rent, staff cover, etc; the additional profit from door takings doesn't cover this loss. The same may be true of a gig: the loss in merchandise sales from pricing fans out of the market outweighs the loss in ticket revenue from discounting the tickets.
IMSoP
CC BY-SA 3.0
2015-07-24T17:15:30.533Z
@FooBar To clarify, you disagree with dismalscience when you say 'If artists want to sell stuff to customers once they're inside, I dont see why they wouldnt want to select the richest fans as customers'?
BCLC
CC BY-SA 3.0
2015-07-24T17:57:53.790Z
@BCLC Exactly. And the point made by IMSoP about excessive risk doesn't sound too plausible to me either, unless you believe that rich people care so much less about their (more expensive) tickets that they are more likely than poor people to ditch their tickets.
FooBar
CC BY-SA 3.0
2015-07-16T21:28:06.660Z
2015-07-16T21:28:06.660Z
dismalscience
<p>I'm going to look more generalized at the producer's side of things.</p>
<ul>
<li>Either the producer wants to use price discrimination to maximize his own profits. In that case, earlier tickets may be cheaper, and later bought tickets are more expensive. Then, all tickets scalpers do is reap the producer surplus. It would be similar to a student buying items at student discount and then selling for the full price.</li>
<li>Or the producer has some alternative reasons for <strong>not</strong> doing the above mentioned: He is giving up profits, in order to achieve alternative goals. For example, as dismalscience mentioned, he may be interested in giving many customers the idea that they could afford a ticket (for whatever reason). In that case, the ticket scalper has disabled the producer from doing so, effectively again reaping producer surplus.</li>
</ul>
<h2>tl;dr: No matter how you look at it, ticket scalpers are freeloading off the producers and reaping producer surplus.</h2>
<p><em>Side comment: Just because something is arbitrage, doesnt mean it is good for the economy. Hence, declaring something as arbitrage is no ground what-so-ever for legalizing it</em></p>

CC BY-SA 3.0
2015-07-17T15:57:25.657Z
But, to play devil's advocate, there are many things that people do in other markets that reduce producer surplus—such as starting up a competing business. Far from banning such practices, we actively encourage them. Why should protecting producer surplus be considered a legitimate policy objective in this specific industry? Do you think it is because we believe the process of scalping is sufficiently costly to offset any efficiency gain, or do you have some other justification in mind?
Ubiquitous
CC BY-SA 3.0
2015-07-17T16:05:39.547Z
@Ubiquitous Introducing competition increases consumer surplus. This? Not so much. Perhaps to some extent competing ticket scalpers will reduce end game prices, but I don't think that they're ever cheaper than the listing price.
FooBar
CC BY-SA 3.0
2015-07-17T19:41:47.320Z
If scalping were legalised then free entry into the scalping market should eliminate the excessive profits that everyone seems so worried about. Also, see here for an account of ticket resale below face value—which anti-scalping laws presumably prevent: http://cheaptalk.org/2013/01/30/anti-scalping/.
Ubiquitous
CC BY-SA 3.0
2015-07-18T11:52:44.187Z
@Ubiquitous my micro theory is somewhat rusty, but isnt usually the introduction of competititon welfare improving? [Perhaps this is a separate question]. At least it does increase the quantity produced. I dont see that happening here either. So all that is happening is a redistribution of surplus, but not an increase in it.
FooBar
CC BY-SA 3.0
2015-07-17T13:58:31.290Z
2015-07-17T13:58:31.290Z
2020-06-17T09:40:54.643Z
FooBar
<p>It is my impression that the fact that "scalping tickets" is considered illegal (or at least restricted) in many parts of the world, may be due to the following reasons:</p>

<p><strong>A) Transactional:</strong> A ticket has <em>a <strong>consumer</strong> price <strong>printed</strong> on it</em>. This means that the supplier of the service has announced/committed to a price at which he is willing to provide the service/product. This creates a different transactional framework than the one where by design a market works auction-style, or bargaining-style. In many places, re-selling such products at prices higher than the printed one, is legally considered a violation of consumer rights, <em>even if only indirectly</em>, because, in such cases one has to at least clearly disclose also the nominal price (i.e. the seller should "shout" something like "I sell a ticket that has a nominal value of 10 USD for 13 USD "). Have you ever heard such an announcement?</p>

<p><strong>B) Tax:</strong> In many cases, ticket scalpers are not official wholesalers (who in any case would have bought the tickets at prices lower than the nominal one, and then would resell it at the nominal price), but rather, undeclared entrepreneurs buying tickets at the nominal price as though they were consumers, and counting on excess demand to sell them at higher prices  in under-the-counter transactions.</p>

<p><strong>C) Ethical:</strong>  While event-going cannot be considered life-critical, it does have a strong element of "psychological/emotional" (i.e. not-rational) desire. When one counts on such an aspect to sell at a price higher than the actual supplier of the object/service of desire demands, it is more often than not deemed as "exploitation", in many cultural settings. While from the point of view of Economics, this is just market-clearing, we should not forget that how Economics views the world is not necessarily how societal ethics (or ideals), do: Although no third party is forcing an event-goer to go to the event, societies tend to consider a buyer driven by such desires as "having the right to be protected from any negative side-effects of his own desires" -and themeselves as having the obligation to provide such protection.</p>

<p>An interesting article/review of the matter, with some examples regarding anti-ticket-scalping regulation in the USA can be found <strong><a href="http://www.thesmartjournal.com/SMART-ticket%20scalping.pdf" rel="nofollow">here</a></strong>. The article discusses also the underlying worries/views that appear to lead to such rules and regulations.</p>

<p>It appears that ticket-scalping is treated as a special case of scalping, and has its own legislation.</p>

CC BY-SA 3.0
2015-07-17T12:58:24.097Z
"In many places, re-selling such products at prices higher than the printed one, is legally considered a violation of consumer rights." - _legally_? Can I sue the gas station for selling Arizona tea (with "99c" printed on it by the manufacturer) for more than a dollar?
Random832
CC BY-SA 3.0
2015-07-17T13:10:38.043Z
@Random832 that would depend on the law within your local jurisdiction. In many places a printed price is enforceable as a maximum retail price for a primary sale. This may not cover touting, which is a re-sale.
410 gone
CC BY-SA 3.0
2015-07-17T13:11:59.423Z
That is very surprising and I think this answer needs a list of examples with citations. In particular if the claim is that this is a general law allowing manufacturers to enforce maximum retail prices rather than a special one that only applies to event tickets (as many jurisdictions do have laws specifically targeted at scalping)
Random832
CC BY-SA 3.0
2015-07-17T13:13:42.360Z
@Random832 I suspect it's only surprising to you because this is not the standard in your local jursidiction. It is in mine, and I'm always surprised to find that other places, even nominally "developed" countries, don't have basic consumer protection.
410 gone
CC BY-SA 3.0
2015-07-17T13:14:19.213Z
Also, a maximum price for a primary sale would be enforceable by a contract between the manfufacturer and seller, and therefore wouldn't need this rule.
Random832
CC BY-SA 3.0
2015-07-17T13:15:07.460Z
Why is this "basic consumer protection"? You don't have a _right_ to have a product sold to you _at all_, let alone at a given price. You're not being misled as to what price you can buy it at (unless the product is on display with the printed price visible). This law, if and where it exists, creates a right for manufacturers and other producers to enforce _their_ will on the middlemen, not consumers.
Random832
CC BY-SA 3.0
2015-07-17T13:36:14.463Z
@Random832 Re: the last comment. But tickets, exactly, _are_ "on display with the printed price visible". And the same goes for many other products. And it is indeed the case for many products that large manufacturers do impose the _consumer_ pricing policy, middlemen notwithstanding. Also note that my answer offers some "reasons why" - it does not evaluate what are the consequences, or whether these reasons are "justified".
Alecos Papadopoulos
CC BY-SA 3.0
2015-07-17T13:42:55.007Z
My use of the term "on display" is something that depends on the specific circumstances something's sold in. I'm talking about something like a can of tea that's on a shelf and someone would look at it and make their purchasing decision based on the price they see (unless the shop owner has covered the manufacturer-printed price up with a sticker) - that's the only way this would be "basic consumer protection", as @EnergyNumbers (not you) claimed. Also, a manufacturer can easily impose a pricing policy on primary sales by a contract, rather than by printing a price on the product.
Random832
CC BY-SA 3.0
2015-07-17T13:47:34.890Z
I really do think you need a citation showing what jurisdictions consider it to be _illegal_ to sell _any_ product (i.e. not just event tickets, since such laws wouldn't be based solely on the fact that it has a price printed on it) at a price higher than the one originally printed on it by the producer.
Random832
CC BY-SA 3.0
2015-07-17T14:54:19.900Z
@Random832 Thanks for insisting. I added a little something.
Alecos Papadopoulos
CC BY-SA 3.0
2015-07-16T23:26:20.793Z
2015-07-17T14:54:01.533Z
2015-07-17T14:54:01.533Z
Alecos Papadopoulos
<p>IMHO, <a href="https://en.wikipedia.org/wiki/Ticket_resale">scalping tickets</a> is no different from <a href="https://en.wikipedia.org/wiki/Scalping_(trading)">legitimate arbitrage</a> unless <a href="http://www.cnbc.com/2015/04/21/futures-trader-charged-for-manipulating-stock-market-contributing-to-2010-flash-crash.html">manipulative</a>.</p>

<p>Iirc, arbitrage increases surplus and hindering scalping is setting a <a href="https://en.wikipedia.org/wiki/Price_ceiling">price ceiling</a> which leads to deadweight loss or something like that.</p>

<p>So why do some states ban scalping tickets?</p>

<p>I'm assuming that such states think there is some perceived harm to their economy. Strangely enough, why tickets? Why not bags, clothes or phones?</p>

<microeconomics><consumer-theory><surplus><arbitrage>
Is scalping tickets harmful?
BCLC
# Is scalping tickets harmful?

(Asked by: username_0 on 2015-07-16)

IMHO, [scalping tickets](https://en.wikipedia.org/wiki/Ticket_resale) is no different from [legitimate arbitrage](https://en.wikipedia.org/wiki/Scalping_(trading)) unless [manipulative](http://www.cnbc.com/2015/04/21/futures-trader-charged-for-manipulating-stock-market-contributing-to-2010-flash-crash.html).

Iirc, arbitrage increases surplus and hindering scalping is setting a [price ceiling](https://en.wikipedia.org/wiki/Price_ceiling) which leads to deadweight loss or something like that.

So why do some states ban scalping tickets?

I'm assuming that such states think there is some perceived harm to their economy. Strangely enough, why tickets? Why not bags, clothes or phones?

**Tags:** microeconomics, consumer-theory, surplus, arbitrage


---

## 3 answers

### Answer by username_1 on 2015-07-16. Score: 16

There is a good [Planet Money episode](http://www.npr.org/sections/money/2013/06/27/196277836/kid-rock-takes-on-the-scalpers) on ticket scalping; I recommend it.

The reason for banning ticket scalping has nothing to do with economic harm, and everything to do with making the arts (or sports, whatever) accessible to people of more-modest means. Consider the fact that artists could, if they wanted, just auction off all the seats to their shows, capturing all the surplus and putting scalpers out of business.\*

If artists did this, however, lots of people wouldn't be able to afford to see popular artists perform. Many artists (the Planet Money episode uses Kid Rock as an example) want to try to make sure that their fans have a reasonable shot at attending, which means that they want to price the tickets low... but the only way this can work is if resale is illegal.

[It's been suggested](http://www.nytimes.com/2013/06/09/magazine/the-secret-science-of-scalping-tickets.html) that artists (again, the same goes for sports teams) might benefit from making low-priced tickets available to fans for two reasons: because they plan on selling stuff to people once they're inside, and because an artist-fan relationship is hopefully not just a one-shot transaction. The idea is that fans who can attend the occasional show might be more likely to buy recordings, merchandise, and tickets in the future, providing the sort of long-running support that can keep an artist viable over many years.

> [P]erformers who undercharge their fans can paradoxically reap higher profits than those who maximize each ticket price. It’s a strategy similar to the one employed by ventures like casinos and cruise ships, which take a hit on admission prices but make their money once the customers are inside. Concert promoters can overcharge on everything from beer sales to T-shirts, and the benefits of low-priced tickets can accrue significantly over the years as loyal fans return.

\*For the most part— there's some amount of resale that is sort of frictional, which arises from people not being able to attend a show and unloading tickets so they don't just eat the full cost, etc.

> **Comments:**
> **username_2**: See this blog post for some more accounts of artists who don't want to be seen ripping-off their fans: http://cheaptalk.org/2010/06/03/ticket-scalping-why-is-neil-diamond-worth-so-much/  
> **username_3**: If artists want to sell stuff to customers once they're inside, I dont see why they wouldnt want to select the richest fans as customers.  
> **username_3**: The comparison with casinos doesnt hold: Additional seating in casinos (or, creating additional casino seating/area) is cheap, while the same is not true for limited space in a stadium for any given artist.  
> **username_4**: @username_3 It's not about the ability to expand capacity to *more* customers (which anyway *always* has a marginal cost), it's about the risk of *excess* capacity. If a casino prices admission too high, they end up with empty seats which are taking no money, but still costing floor rent, staff cover, etc; the additional profit from door takings doesn't cover this loss. The same may be true of a gig: the loss in merchandise sales from pricing fans out of the market outweighs the loss in ticket revenue from discounting the tickets.  
> **username_0**: @username_3 To clarify, you disagree with username_1 when you say 'If artists want to sell stuff to customers once they're inside, I dont see why they wouldnt want to select the richest fans as customers'?  
> **username_3**: @username_0 Exactly. And the point made by username_4 about excessive risk doesn't sound too plausible to me either, unless you believe that rich people care so much less about their (more expensive) tickets that they are more likely than poor people to ditch their tickets.  
> **username_0**: Dismal science, why not artists sell tickets online but then don't choose all highest bidders?  
> **username_1**: @username_0 They sometimes do that if they're concerned about scalping. One technique is to limit the number of tickets one person can buy and check IDs against tickets at the door (strictly prohibiting resale).  
> **username_0**: username_1, so why don't they just do that?  
> **username_1**: @username_0 Some do. When Neutral Milk Hotel reunited, that's exactly what they did. But it's harder on both venues, who have to enforce it, and fans who have something come up after buying tickets and can't even hand them to a friend for free, so it works best if you have an intense fan base and are playing at smaller venues. It's not a great solution for all shows.  

---

### Answer by username_3 on 2015-07-17. Score: 3

I'm going to look more generalized at the producer's side of things.

* Either the producer wants to use price discrimination to maximize his own profits. In that case, earlier tickets may be cheaper, and later bought tickets are more expensive. Then, all tickets scalpers do is reap the producer surplus. It would be similar to a student buying items at student discount and then selling for the full price.
* Or the producer has some alternative reasons for **not** doing the above mentioned: He is giving up profits, in order to achieve alternative goals. For example, as username_1 mentioned, he may be interested in giving many customers the idea that they could afford a ticket (for whatever reason). In that case, the ticket scalper has disabled the producer from doing so, effectively again reaping producer surplus.

## tl;dr: No matter how you look at it, ticket scalpers are freeloading off the producers and reaping producer surplus.

*Side comment: Just because something is arbitrage, doesnt mean it is good for the economy. Hence, declaring something as arbitrage is no ground what-so-ever for legalizing it*

> **Comments:**
> **username_2**: But, to play devil's advocate, there are many things that people do in other markets that reduce producer surplus—such as starting up a competing business. Far from banning such practices, we actively encourage them. Why should protecting producer surplus be considered a legitimate policy objective in this specific industry? Do you think it is because we believe the process of scalping is sufficiently costly to offset any efficiency gain, or do you have some other justification in mind?  
> **username_3**: @username_2 Introducing competition increases consumer surplus. This? Not so much. Perhaps to some extent competing ticket scalpers will reduce end game prices, but I don't think that they're ever cheaper than the listing price.  
> **username_2**: If scalping were legalised then free entry into the scalping market should eliminate the excessive profits that everyone seems so worried about. Also, see here for an account of ticket resale below face value—which anti-scalping laws presumably prevent: http://cheaptalk.org/2013/01/30/anti-scalping/.  
> **username_3**: @username_2 my micro theory is somewhat rusty, but isnt usually the introduction of competititon welfare improving? [Perhaps this is a separate question]. At least it does increase the quantity produced. I dont see that happening here either. So all that is happening is a redistribution of surplus, but not an increase in it.  

---

### Answer by username_5 on 2015-07-16. Score: 2

It is my impression that the fact that "scalping tickets" is considered illegal (or at least restricted) in many parts of the world, may be due to the following reasons:

**A) Transactional:** A ticket has *a **consumer** price **printed** on it*. This means that the supplier of the service has announced/committed to a price at which he is willing to provide the service/product. This creates a different transactional framework than the one where by design a market works auction-style, or bargaining-style. In many places, re-selling such products at prices higher than the printed one, is legally considered a violation of consumer rights, *even if only indirectly*, because, in such cases one has to at least clearly disclose also the nominal price (i.e. the seller should "shout" something like "I sell a ticket that has a nominal value of 10 USD for 13 USD "). Have you ever heard such an announcement?

**B) Tax:** In many cases, ticket scalpers are not official wholesalers (who in any case would have bought the tickets at prices lower than the nominal one, and then would resell it at the nominal price), but rather, undeclared entrepreneurs buying tickets at the nominal price as though they were consumers, and counting on excess demand to sell them at higher prices in under-the-counter transactions.

**C) Ethical:** While event-going cannot be considered life-critical, it does have a strong element of "psychological/emotional" (i.e. not-rational) desire. When one counts on such an aspect to sell at a price higher than the actual supplier of the object/service of desire demands, it is more often than not deemed as "exploitation", in many cultural settings. While from the point of view of Economics, this is just market-clearing, we should not forget that how Economics views the world is not necessarily how societal ethics (or ideals), do: Although no third party is forcing an event-goer to go to the event, societies tend to consider a buyer driven by such desires as "having the right to be protected from any negative side-effects of his own desires" -and themeselves as having the obligation to provide such protection.

An interesting article/review of the matter, with some examples regarding anti-ticket-scalping regulation in the USA can be found **[here](http://www.thesmartjournal.com/SMART-ticket%20scalping.pdf)**. The article discusses also the underlying worries/views that appear to lead to such rules and regulations.

It appears that ticket-scalping is treated as a special case of scalping, and has its own legislation.

> **Comments:**
> **username_6**: "In many places, re-selling such products at prices higher than the printed one, is legally considered a violation of consumer rights." - _legally_? Can I sue the gas station for selling Arizona tea (with "99c" printed on it by the manufacturer) for more than a dollar?  
> **username_7**: @username_6 that would depend on the law within your local jurisdiction. In many places a printed price is enforceable as a maximum retail price for a primary sale. This may not cover touting, which is a re-sale.  
> **username_6**: That is very surprising and I think this answer needs a list of examples with citations. In particular if the claim is that this is a general law allowing manufacturers to enforce maximum retail prices rather than a special one that only applies to event tickets (as many jurisdictions do have laws specifically targeted at scalping)  
> **username_7**: @username_6 I suspect it's only surprising to you because this is not the standard in your local jursidiction. It is in mine, and I'm always surprised to find that other places, even nominally "developed" countries, don't have basic consumer protection.  
> **username_6**: Also, a maximum price for a primary sale would be enforceable by a contract between the manfufacturer and seller, and therefore wouldn't need this rule.  
> **username_6**: Why is this "basic consumer protection"? You don't have a _right_ to have a product sold to you _at all_, let alone at a given price. You're not being misled as to what price you can buy it at (unless the product is on display with the printed price visible). This law, if and where it exists, creates a right for manufacturers and other producers to enforce _their_ will on the middlemen, not consumers.  
> **username_5**: @username_6 Re: the last comment. But tickets, exactly, _are_ "on display with the printed price visible". And the same goes for many other products. And it is indeed the case for many products that large manufacturers do impose the _consumer_ pricing policy, middlemen notwithstanding. Also note that my answer offers some "reasons why" - it does not evaluate what are the consequences, or whether these reasons are "justified".  
> **username_6**: My use of the term "on display" is something that depends on the specific circumstances something's sold in. I'm talking about something like a can of tea that's on a shelf and someone would look at it and make their purchasing decision based on the price they see (unless the shop owner has covered the manufacturer-printed price up with a sticker) - that's the only way this would be "basic consumer protection", as @EnergyNumbers (not you) claimed. Also, a manufacturer can easily impose a pricing policy on primary sales by a contract, rather than by printing a price on the product.  
> **username_6**: I really do think you need a citation showing what jurisdictions consider it to be _illegal_ to sell _any_ product (i.e. not just event tickets, since such laws wouldn't be based solely on the fact that it has a price printed on it) at a price higher than the one originally printed on it by the producer.  
> **username_5**: @username_6 Thanks for insisting. I added a little something.  

---

