Should Event Organizers Prevent Resale of Tickets?

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.

The Impact of Variable Pricing, Dynamic Pricing, and Sponsored Secondary Markets in Major League Baseball

“…The increase in the team's revenue from having an SSM is only 1%, 11 that is, if there is no spillover on the primary market. But an SSM could decrease a team's overall revenue if it decreases demand in the primary market (Courty, 2003;Cui, Duenyas, & Sahin, 2013).…”

Integration of Primary and Resale Platforms

“…Su (2010) shows that the presence of scalpers will increase an event organizer’s profit because the event organizer can sell tickets to scalpers early and transfer the inventory risk to them. Cui, Duenyas, and Özge (2014) find that an event organizer can benefit from lower resale transaction costs and from selling consumers an option for buying tickets later. Liao (2019) finds that partially allowing ticket scalping can induce consumers to buy tickets early, thus benefiting the event organizer.…”

Managing return policies with consumer resale

“…Thus the retailer is no longer able to extract the values from early buyers. Cui et al (2014) show that consumer resale may also increase the retailer's profit under dynamic pricing with constrained capacity. They further find that consumer resale can increase the retailer's profit by mimicking dynamic pricing when a fixed pricing scheme is employed.…”

“…By contrary, when the product has a large resale value and consumers incur a smaller resale transaction cost than the retailer, the retailer does not offer any return, but benefits from consumer resale. Notice that the existing works on consumer resale also show that consumer resale may either increase or decrease the retailer's profit (e.g., Courty, 2003; Cui et al, 2014). Nevertheless, in these works, the retailer does not consider a return policy.…”