Thursday, June 08, 2006

A legislative balk

A district court judge in Massachusetts ruled yesterday that a disgruntled fan can sue a ticket reseller for charging too much for a Red Sox-Yankees ticket. The fan didn't actually buy the ticket, but if things like this are going to be allowed, why have any logic at any point of the process at all? Couldn't anyone in the general Boston area pursue a lawsuit like this?

Well, the fan that didn't buy the ticket isn't the one actually going to trial-- that's the role of consumer activist Coleman Herman (Socialist - Dorchester). Herman comes across with the typical price gouging argument-- by golly, $500 is just too much for a baseball game! What's worse is the following quote from Herman himself: "It allows me to go to trial and do discovery to find out where Admit One gets its tickets." Nothing like using the system to reach your goals. I think we can file this one under "not a wealth producing activity."

The whole issue stems from a law that has been on the books but is just now starting to be enforced. The letter of the law reads that no one can resell a ticket for more than $2 above face value, plus service charges.

The most frustrating part is the judge's take on the matter:

"The plaintiff had a protected right to purchase a ticket at a price established by law that balances the economic interests of the defendant and the consumer's interests in the event to which the ticket would admit. The plaintiff made an effort to secure a ticket reflective of this balance and was denied the opportunity"
If we are truly balancing the defendant and the plaintiff-- or the buyer and the seller-- then why can't we let them determine a price for the ticket independent of regulation? Wouldn't that balance the economic interests of both parties? The mere fact that the would-be buyer observed the price and decided not to buy the ticket proves that he had exactly the opportunity to secure a balance between his desires to see the game and his opportunity cost for $500.

In theory, a supply and demand curve intersect to create a market clearing price. But there's a whole section of a demand curve below the equilibrium point-- these are people who don't want to trade. Why do we need laws to serve them? It was their choice not to consume. In the same example, there's a whole section of a supply curve that doesn't get to trade either-- the prices they desire are simply too high. Don't they then deserve the right to sue the people that didn't buy their tickets? Something tells me that we're not going to see lawsuits on their behalf since consumers won't buy their goods that are priced too high.

Fortunately, if you find yourself in a state that does things like this, there's an easy way to get around it. Bundling your sought-after ticket with another good for one market-determined price is usually good enough to keep you away from the law. So the next time you want to sell your baseball tickets, bundle them with a baseball, and let everyone become better off with the trade.


Thomas said...

"Something tells me that we're not going to see lawsuits on their behalf since consumers won't buy their goods that are priced too high."

Actually, recently we have been seeing lawsuits like that thanks to the MPAA and RIAA. Admittedly it's cloaked in the guise of copyright suits, just as this is cloaked in the guise of price-gouging, but it's the same net effect


danarch said...

The main problem with charging $500 for a $60 ticket is that this hurts the actual team or venue. If they manage to sell one ticket at the $500 price, they can forgo selling 4 more tickets and still make a nice profit off of the deal. That means 4 empty seats - which I'm sure the baseball venue doesn't want.

I think the law was designed to prevent scalping - buying up a bunch of tickets and selling them at much higher prices, because when someone buys 1000 tickets at 60 a pop, and then turns around and tries to sell them for $500, they only have to sell 120 tickets to cover the costs and they figure that at least 150 people will be desperate enough to pay those prices. But this leaves the venue with 850 empty seats - I'm sure this leads to inefficiency.

Matt E. Ryan said...

Dana-- The team's actual role in this example ends when the ticket is sold at $60. That's the price level determined by the club. Presumably, that's the price by which they feel is fair, and can generate the most revenue, given the associated elasticity for tickets.

Now, the only time that a ticket is going to be pushed to a $500 level in the "after" market is when the demand for seats is extremely high. In other words, a lot of people want the tickets, and those that have them are likely to use them (with $500 being the opportunity cost, I don't think many would skip out on the game).

Consider the example of a scalper securing 1000 tickets for one game in extreme demand. I don't know the specifics of scalpers and how many tickets they tend to control, but I would be willing to bet that one group holding that many tickets is probably a bit extreme-- but that doesn't change anything. If they want to sell tickets at $500 a pop, they can-- and maybe they'll only sell a few. But with tickets, after the game is played, they are worthless. If it came down to an hour before game time and they still had 850 tickets left, and the choice of sticking at $500 and selling none, or lowering their prices and getting what they can for them-- they're going to maximize the money they can get for their goods before they become useless.

Personally, I'm surprised that teams don't auction off more of their tickets to try and capture a greater share of the surplus out there. (There could well be laws against this.) That's how scalpers end up having a role in the ticket process-- there's unclaimed surplus out there. Selling tickets for only a few different price levels for all games is not a great way of matching the consumer's differing desires to see certain games. The Red Sox/Yankees, for example, is a very sought after ticket. Most Red Sox and Yankees tickets tend to be-- but when a buddy of mine went to the Yankees/A's game in New York a little while back, we had no problem securing two $12 tickets (face of $10) from a local ticket pusher.

Anonymous said...

(warning: the following is written by someone with only a second-hand education in economics, so go easy on me if I mess up some terminology.)

The one interesting point that Dana brings out is the fact that the ball club does have an interest in filling the seats (not just selling the tickets for them). That's because they make a fair deal of money on concession sales. So, the price they are trying to secure is the ticket sales plus the expected average income made when people at the game buy snacks. So, if some very irrational actor chose to buy 1,000 tickets and burn them, the ball club would not be entirely satisfied. They got their asking price for the tickets, but they didn't sell the beer and hot dogs. Which they do count on doing to a degree, it's how they extract more money from the buyer.

Perhaps the solution is to charge more for the tickets and then have the concessions be dirt cheap. I've actually thought about this before -- what if the snacks at movie theaters was cheaper than you can get them at 7-11? How much would ticket prices have to rise? Anyhow, seems like the ball clubs could possibly get away with raising their prices if they sold the food at price, so then the consumer realizes that when they are buying the ticket they are getting admission to a club that not only sells entertainment, but also (like Costco) sells discounted snacks. I wonder, once you're in the game are you more likely to spend even more than you would anyhow on the snacks since it's cheaper than the market rate, and you're already there anyhow? I mean, clearly you will spend more, but would it be enough more to make it more than you would have spent on the more expensive snacks?

Nog said...

If the original seller of the tickets (the team) doesn't find it necessary to put conditions on the resale of their products, there is no issue from their side. Their values are reflected by whether or not such provisions are put into place.

If there were conditions placed on the original sale that were not honored, that would be a whole new game. Fraud is fraud and breach of contract is breach of contract. And no special "game ticket" oriented policies would be necessary.

Another issue could be that the club fears state force if they place the prices at their natural levels. The second-hand seller is simply filling the void. Otherwise price controls would create shortages.

Anonymous said...

These mindless judges have ruined society and the sense of reason for generations to come.


Anonymous said...

Did Coleman ever find out where they got the tickets from?