Primary-Market Auctions for Event Tickets: Eliminating the Rents of 'Bob the Broker'?

58 Pages Posted: 23 Mar 2013 Last revised: 5 Sep 2017

See all articles by Aditya Bhave

Aditya Bhave

University of Chicago

Eric B. Budish

University of Chicago - Booth School of Business

Date Written: September 3, 2017

Abstract

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

Suggested Citation

Bhave, Aditya and Budish, Eric B., Primary-Market Auctions for Event Tickets: Eliminating the Rents of 'Bob the Broker'? (September 3, 2017). Chicago Booth Research Paper No. 13-36. Available at SSRN: https://ssrn.com/abstract=2237451 or http://dx.doi.org/10.2139/ssrn.2237451

Aditya Bhave

University of Chicago

1101 East 58th Street
Chicago, IL 60637
United States

Eric B. Budish (Contact Author)

University of Chicago - Booth School of Business ( email )

5807 S. Woodlawn Avenue
Chicago, IL 60637
United States
773-702-8453 (Phone)

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