Ticket scalpers are probably some of the most maligned and misunderstood characters in the world. The ticket scalper is a speculator. He buys and re-sells tickets to sporting events, concerts, and other popular venues. Depending upon the popularity of the event, the scalper will pay below face value, exactly face value, or sometimes above face value. He is betting that he can sell the ticket for more than he paid. In some municipalities ticket scalping is illegal, but these laws are loosely enforced. It is my opinion that all laws against ticket scalping should be abolished. Furthermore, I think that ticket scalpers are useful members of society that perform a marvelous public service.
To discuss ticket scalpers a more rational light, let’s refrain from calling them “scalpers”. Instead let’s refer to them as ticket “resellers”. For simplicity, let’s assume that the ticketed event is a Saturday afternoon playoff game between the New York Yankees and the Boston Red Sox at Fenway Park. One reason that some people dislike ticket resellers is that there is often a large gap between the re-seller’s price and the face value of the ticket. The buyer who pays $300 for a ticket with a face value of $65 might think that he has been ripped off. In fact, the $300 price is the market value of the ticket. Given the significance of a playoff game, the intense historic rivalry between the teams, the star-status of the players, and the bucolic setting of Fenway Park, the ticket is actually worth $300. While the Boston Red Sox priced and sold the ticket for $65, its actual market value is $300.
We know that $300 is the “market” value of the ticket because it is the price to which a willing seller and a willing buyer have agreed. The reseller wanted the buyer’s $300 more than he wanted the ticket. The buyer wanted the ticket more than he wanted his $300. Otherwise the sale wouldn’t have taken place. No coercion was involved in the transaction. Of course, the reseller wishes he could have gotten more than $300 for the ticket and the buyer wishes he had paid less than $300 for the ticket, but at a higher or lower price the transaction would not have taken place. This ticket sale for the sum of $300 is a quintessential market transaction. It is a win, win situation for both buyer and seller. Under no conditions should this sale be considered either immoral or illegal.
There is another reason that ticket scalpers are good for society. The existence of scalpers ensures a more enthusiastic and excited customer, making the ball game even more interesting. Let’s say that the original holder of the Red Sox ticket was a season ticket holder who was going to be gone for the weekend. If the scalping didn’t exist, the season ticket holder might have sold his ticket for face value ($65) to his neighbor, a lukewarm Red Sox fan. Instead, the reseller intervened, paying the ticket holder perhaps $200 for his ticket and selling the ticket to the eventual buyer for $300. It is obvious that the fan who paid $300 for the ticket will be much more enthusiastic than the neighbor of the season ticket holder, who paid only $65 for the ticket. The $300 fan will yell louder and be much more enthusiastic because he values the sporting event much more than the neighbor. Show me a game where lots of seats are filled with people that paid three-times face value and I’ll show you a game where the fans are yelling their heads off!
Finally, people often presume that scalpers always make money, but reselling entails real risks. First of all, there is competition from resellers to purchase their ticket “inventory”. Only the reseller that pays the highest price for the ticket will be able to purchase them. For example, a season ticket holder to the above-mentioned Yankee-Red Sox playoff game knows that his tickets are valuable. He is unlikely to sell them cheaply to the reseller. It is not likely that he will sell the ticket to a reseller for face value; the reseller will have to pay substantially above face value. Having paid, say $200 for the ticket, the reseller must now find a buyer that will pay him more than $200, but there is risk in this arrangement. What if a key super-star is injured before the game? What if it rains? Then there is timing. As the reseller stands outside the stadium looking for a buyer, the clock is ticking. If he sells to the first potential customer, perhaps his price was too low. As he waits for a customer that will pay him more, the clock is ticking. After the game starts the market price of the ticket will steadily decline. The ticket is worth more in the first inning than it is in the third inning. After the fourth inning the ticket is practically worthless. In fact, resellers often must move their inventory at far below the face value of the ticket. I have routinely purchased $40 face value tickets to major-league baseball games for $5 by waiting until the third inning. If you want to see a scalper without bargaining power, look in his eyes at the top of the fourth! By the fourth inning, you’re the boss!
I’ve purchased many tickets from resellers and have never bought a counterfeit ticket. Most resellers are honest. After all, they work the same venues, day after day. If they sold counterfeit tickets their sales careers would not last long. Instead of making scalping illegal, if local governments licensed resellers for a nominal fee with resellers required to post a bond as a license requirement, the bond would guarantee the legitimacy of tickets sold by resellers. Resellers could then wear an official license badge so buyers could readily identify them if they sell counterfeit tickets. Websites like stubhub.com require ticket sellers to guarantee the legitimacy of their tickets by supplying their credit card information. Licensing of resellers would virtually eliminate the possibility of counterfeit tickets, which is the only real risk that buyers now face when buying tickets from resellers.
Most economists appreciate scalping because they realize that resellers create efficient markets for event ticketing. After all, if NFL team owners or Broadway producers charged market prices for their tickets, scalpers would be out of business. By charging a face value that is too low, team owners and Broadway producers deny themselves income and guarantee scalpers a living. As long as there is a difference in the face value of a ticket and its market value scalpers will be alive and well! Bravo to the scalpers!