Price Caps by Matching Platforms: The Case of Ticket Resales

48 Pages Posted: 20 Dec 2023

See all articles by Da He

Da He

Hong Kong University of Science & Technology (HKUST) - Department of Marketing

Song Lin

Hong Kong University of Science & Technology (HKUST) - Department of Marketing; Hong Kong University of Science & Technology (HKUST); Hong Kong University of Science and Technology

Date Written: December 7, 2023

Abstract

In recent years, a growing number of ticket resale platforms have imposed price caps on ticket trading. This practice has been perceived to protect consumer welfare, at the expense of less platform profit. However, we show that this self-regulation can counter-intuitively hurt consumers while benefiting ticket trading platforms, even if consumers are fully rational and unconcerned with price fairness. We demonstrate how this result may arise in a matching model of sellers and buyers. Sellers have a limited supply of tickets and are heterogeneous in their willingness to sell on a platform. The platform collects a royalty fee from every transaction but can impose a cap on the transaction price. We show that a stringent price cap may drive those sellers who would otherwise charge a high price out of the market, thereby reducing the competition on the seller side. As a result, the average transaction price may turn out to be higher than that in a market with no price restriction. We discuss the relevant managerial and policy implications.

Keywords: platforms, pricing, matching, game theory, ticket resales, public policy - legal

Suggested Citation

He, Da and Lin, Song, Price Caps by Matching Platforms: The Case of Ticket Resales (December 7, 2023). Available at SSRN: https://ssrn.com/abstract=4658103 or http://dx.doi.org/10.2139/ssrn.4658103

Da He (Contact Author)

Hong Kong University of Science & Technology (HKUST) - Department of Marketing ( email )

Department of Marketing
Clear Water Bay, Kowloon
Hong Kong

Song Lin

Hong Kong University of Science & Technology (HKUST) - Department of Marketing ( email )

LSK 4005, HKUST Business School
Clear Water Bay
Hong Kong, Hong Kong, China na
Hong Kong
Clear Water Bay (Fax)

HOME PAGE: http://www.bm.ust.hk/mark/staff/song_lin.html

Hong Kong University of Science & Technology (HKUST) ( email )

Clearwater Bay
Kowloon, 999999
Hong Kong

Hong Kong University of Science and Technology ( email )

Clearwater Bay
Kowloon, 999999
Hong Kong

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