<scp>When Promoters Like Scalpers</scp>

Karp, Larry S.; Perloff, Jeffrey M.

doi:10.1111/j.1530-9134.2005.00049.x

Cited by 29 publications

(26 citation statements)

References 20 publications

(20 reference statements)

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“…In this literature, scalpers exploit arbitrage opportunities and make definite profits by buying and then reselling units. For example: Swofford (1999) assumes that scalpers are less risk-averse than the seller and earn a guaranteed risk premium by serving as middlemen; Courty (2003a) assumes that consumers who arrive later have higher valuations so scalpers make sure profits by reselling to them; and Karp and Perloff (2005) assume that scalpers are able to perfectly price discriminate and extract maximal consumer surplus. In contrast, speculation is a risky prospect in our model: due to aggregate demand uncertainty, speculators may "flip" the unit for a profit as intended, but they may also incur losses.…”

Section: Literature Reviewmentioning

confidence: 99%

Optimal Pricing with Speculators and Strategic Consumers

2010

Management Science

102

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This paper studies a monopolist firm selling a fixed capacity. The firm sets a price before demand uncertainty is resolved. Speculators may enter the market purely with the intention of resale, which can be profitable if demand turns out to be high. Consumers may strategically choose when to purchase, and they may also choose to purchase from the firm or from the speculators. We characterize equilibrium prices and profits and analyze the long-run capacity decisions of the firm. There are three major findings. First, the presence of speculators increases the firm's expected profits even though the resale market competes with the firm. Second, by facilitating resale, the firm can mimic dynamic pricing outcomes and enjoy the associated benefits while charging a fixed price. Third, speculative behavior may generate incentives for the seller to artificially restrict supply, and thus may lead to lower capacity investments. We also explore several model extensions that highlight the robustness of our results.Keywords dynamic pricing, speculation, resale, strategic customer behavior, competition Disciplines Marketing | Sales and MerchandisingThis journal article is available at ScholarlyCommons: http://repository.upenn.edu/oid_papers/165Electronic copy available at: http://ssrn.com/abstract=1441533 Optimal Pricing with Speculators and Strategic Consumers Xuanming SuHaas School of Business, University of California, Berkeley, CA 94720 AbstractThis paper studies a monopolist firm selling a fixed capacity. The firm sets a price before demand uncertainty is resolved. Speculators may enter the market purely with the intention of resale, which can be profitable if demand turns out to be high. Consumers may strategically choose when to purchase, and they may also choose to purchase from the firm or from the speculators. We characterize equilibrium prices and profits and analyze the long run capacity decisions of the firm.There are three major findings. First, the presence of speculators increases the firm's expected profits even though the resale market competes with the firm. Second, by facilitating resale, the firm can mimic dynamic pricing outcomes and enjoy the associated benefits while charging a fixed price. Third, speculative behavior may generate incentives for the seller to artificially restrict supply and thus may lead to lower capacity investments. We also explore several model extensions that highlight the robustness of our results.

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Section: Literature Reviewmentioning

confidence: 99%

Optimal Pricing with Speculators and Strategic Consumers

2010

Management Science

102

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“…Theoretical papers by Courty [2003a, b] and Karp and Perloff [2005] consider two-period models and reach differing conclusions regarding the impact of scalpers on a monopolist producer's profits. The differing results are largely based on assumptions regarding when consumers know their willingness to pay [Karp and Perloff 2005].…”

Section: Related Literaturementioning

confidence: 99%

“…The differing results are largely based on assumptions regarding when consumers know their willingness to pay [Karp and Perloff 2005]. Courty's model draws on an analogy to airline ticket pricing.…”

Section: Related Literaturementioning

confidence: 99%

“…In Courty's model, the presence of ticket scalpers can decrease the profits of producers because of scalpers' ability to price discriminate more perfectly than the box office. In contrast, Karp and Perloff [2005] assume that all consumers have the same amount of information regarding their willingness to pay, and the value of the ticket does not depend upon when it is purchased. In their model, scalpers do not harm the producer and may in fact benefit the producer.…”

Section: Related Literaturementioning

confidence: 99%

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The Effect of Ticket Resale Laws on Consumption and Production in Performing Arts Markets

Boyle

Chiou

2011

Eastern Econ J

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Although most economists assume that ticket scalping is efficient, existing theoretical models make ambiguous predictions of the effect of ticket resale on production and attendance. This study uses variation in state and municipal laws to examine whether prohibiting or restricting resale has a positive or negative impact on consumer attendance and producer entry into arts markets. Our results show that restrictions on resale prices and license requirements stimulate attendance in performing arts events, but decrease the number of unique productions. This suggests that consumers value regulation that restricts prices and requires licensing for resellers over greater variety in productions.

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“…Such ticket touting (or scalping) is a common phenomenon at all public entertainments, for which demand exceeds supply, and it is one that economists have sought to rationalize [see e.g. de Serpa (1994), Courty (2000Courty ( , 2003, Karp and Perloff (2002), Krueger (2001)]. …”

mentioning

confidence: 99%

E-Baying for blood?: noncompetitive flexible pricing in entertainment ticketing–some demand side evidence

Cameron

2008

Applied Economics

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When Promoters Like Scalpers

Cited by 29 publications

References 20 publications

Optimal Pricing with Speculators and Strategic Consumers

Optimal Pricing with Speculators and Strategic Consumers

The Effect of Ticket Resale Laws on Consumption and Production in Performing Arts Markets

E-Baying for blood?: noncompetitive flexible pricing in entertainment ticketing–some demand side evidence

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