Tuesday, July 23, 2013

Could Second Item Auctions be Used for Ticket Sales?

Every time a big concert, game, show or whatnot goes on sale, we invariably read people complaining about scalpers taking all of the tickets and then jacking up the prices.

Firstly, let me try and summarise my take on both sides of the argument. The anti-scalper argument is that because scalpers are buying as many tickets as possible, and because their business revolves around the fact that they can get these tickets, it means that the scalpers are going to always try and be first to buy, and have a financial incentive to do so. That is to say, the fans have less of a chance to buy the tickets.

The pro-scalper argument is that basically it's the free market, baby! When scalpers can buy and sell tickets for a profit, then that indicates that the original ticket price was 'wrong', in that the sellers were leaving money on the table so to speak.

So with that being my understanding of the problem, I ask: what would happen if tickets were sold off in the form of a second item auction? A second item auction is when you are auctioning more than one identical item, and basically the winners are those people that bid the most... with the 'twist' being that all winners only pay the lowest winning bid.

For what it's worth, I always thought this was called a Dutch auction, but that link to Wikipedia actually says that a second item auction can be confused with a Dutch auction, so I don't feel so bad...

So off the bat, this sounds like a horrible idea: in theory the scalpers are cut out of the process, as those people that are willing to spend big will do that directly with the seller. The fans are probably screwed out of the process too, though, as they are likely going to be outbid.

Over time, though, I wonder if the prices would fall, as there is going to be a group of people that are bidding higher than they would like, just to make sure they get to go to the show? In my head, at least, I think that as this goes on for a little bit and scalpers are essentially squeezed out of the market, these people will find that they can slowly lower their bids and still get tickets.

Either way, it would definitely remove a lot of the incentive for the scalpers, and would even remove the argument for the existence of them: the whole 'the price is not what the market is willing to bear'.

And who knows? Maybe the other fans will be happier, just knowing that there isn't someone there, buying tickets from under them simply to make money. Or not...

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