Question

Scalping tickets is a great way to see how markets work. For many, going to the game has value, and that value will vary widely. When teams price tickets and don't sell out it lets us know that they priced tickets too highly. The opposite is true for games that do sell out and more people want to go to the game than tickets available. However, the scalper and ticket buyer truly show how a market (free from price controls) can lead better outcomes. Yet, in many states ticket scalping is either illegal or strictly enforced.

Consider the state of Georgia. Under Georgia state law, it is unlawful to sell a ticket in excess of face value (there are some added caveats as well). Whereas, Alabama allows resell of tickets with the condition that the scalper has paid $100 for a license.

A) Consider that the ticket price set by the team, is not the market clearing price. If the stadium isn't filled, then the price of the ticket was too _____ and created a _____ in the market.

B) Consider that the ticket price set by the team, is not the market clearing price. If the stadium is full, and more people want to go to the game, then the price of the ticket was too _____ and created a _____ in the market.

C) Explain why, in states where scalping is illegal, ticket scalping is essentially a price floor of infinity.

D) In a state where scalping is illegal, what creative way could a scalper sell you a ticket for more than the face value of the ticket?

Answer 1

A) The price of ticket was too high and created a surplus in the market

B) The price of ticket was too low and created a shortage in the market

C) Price floor is a government control price of how low a good can be charged. It is set above the market clearing price. There are two extreme forms of price floors: floor of 0 and floor of infinity

A price floor of 0 means a good cannot be given away for free and something must be charged to it

A price floor of infinity means the government wishes to make any price increase illegal and does not allow price to increase over its market clearing price

Thus, in the same way, in case of scalping being illegal, it means the price floor is infinity here

D) The seller can say that the ticket is a limited edition ticket purchased by a celebrity for the show, but has to be sold because the individual cannot attend the show due to personal emergency. This will make the ticket attractive to the buyer and he would be willing to pay a higher price for it