Primary-Market Auctions for Event Tickets: Eliminating the Rents of 'Bob the Broker'?
58 Pages Posted: 23 Mar 2013 Last revised: 5 Sep 2017
Date Written: September 3, 2017
Economists have long been puzzled by event-ticket underpricing: underpricing reduces revenue for the artist, and encourages socially wasteful rent-seeking by ticket brokers. Why not use an auction to set price correctly? This paper studies the introduction of auctions into this market by Ticketmaster. We first show theoretically that Ticketmaster’s auction design, a novel variant of position auctions, has attractive efficiency, revenue and no-arbitrage properties. Then, by combining primary-market auction data from Ticketmaster with secondary-market resale value data from eBay, we show that the auctions “worked” in practice: the auctions substantially improved price discovery, roughly doubled performer revenues, and, on average, nearly eliminated the arbitrage profits associated with underpriced tickets. We conclude by discussing why, nevertheless, the auctions have failed to take off.
Keywords: auctions, market design, primary markets, resale markets, rent-seeking, position
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