Should Event Organizers Prevent Resale of Tickets?

Management Science, Forthcoming

Ross School of Business Paper No. 1191

36 Pages Posted: 17 Jun 2013 Last revised: 24 Feb 2014

See all articles by Yao Cui

Yao Cui

Cornell University - Samuel Curtis Johnson Graduate School of Management

Izak Duenyas

University of Michigan, Stephen M. Ross School of Business

Ozge Sahin

Johns Hopkins University - Carey Business School

Date Written: September 1, 2013

Abstract

We are interested in whether preventing resale of tickets benefits the capacity providers for sporting and entertainment events. Common wisdom suggests that ticket resale is harmful to event organizers' revenues and event organizers have tried to prevent resale of tickets. For instance, Ticketmaster has recently proposed paperless (non-transferrable) ticketing which would severely limit the opportunity to resell tickets. We consider a model that allows resale from both consumers and speculators with different transaction costs for each party. Surprisingly, we find that this wisdom is incorrect when event organizers use fixed pricing policies, in fact event organizers benefit from reductions in consumers' (and speculators') transaction costs of resale. Even when multiperiod pricing policies are used, we find that an event organizer may still benefit from ticket resale if his capacity is small. While paperless ticketing is suggested as a way to reduce ticket resale and prevent speculators from buying tickets, our results suggest that it may reduce the capacity providers' revenues in many situations. Instead, we propose ticket options as a novel ticket pricing mechanism. We show that ticket options (where consumers would initially buy an option to buy a ticket and then exercise at a later date) naturally reduce ticket resale significantly and result in significant increases in event organizers' revenues. Furthermore, since a consumer only risks the option price (and not the whole ticket price) if she cannot attend the event, options may face less consumer resistance than paperless tickets.

Keywords: events, ticket resale, fixed pricing, multiperiod pricing, options, secondary markets

JEL Classification: C72, D49

Suggested Citation

Cui, Yao and Duenyas, Izak and Sahin, Ozge, Should Event Organizers Prevent Resale of Tickets? (September 1, 2013). Management Science, Forthcoming; Ross School of Business Paper No. 1191. Available at SSRN: https://ssrn.com/abstract=2280141

Yao Cui

Cornell University - Samuel Curtis Johnson Graduate School of Management ( email )

Ithaca, NY 14853
United States

Izak Duenyas

University of Michigan, Stephen M. Ross School of Business ( email )

701 Tappan Street
Ann Arbor, MI MI 48109
United States

Ozge Sahin (Contact Author)

Johns Hopkins University - Carey Business School ( email )

100 International Drive
Baltimore, MD 21202
United States

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