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Panthers tickets, angry fans, and the role of scalpers in a free market

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Following their clinching of the #2 seed in the NFC bracket of the 2013-14 NFL playoffs, tickets for the divisional playoff game to be hosted and played by the Carolina Panthers on Jan. 12 went on sale on the morning of Jan. 1. The tickets sold out very quickly, with no more being available on Ticketmaster after only three minutes. Tickets were still available on secondary markets, such as Stubhub, but for considerable markups.

When such events happen, fans tend to get angry and direct their rage at ticket scalpers, who they tend to see as nothing more than middlemen who needlessly raise prices and create artificial scarcity. But let us consider an alternative view based on Walter Block's defense of ticket scalpers in Defending the Undefendable.

First, we should point out the inconsistency of the outrage of those who oppose ticket scalpers. The grocer also buys large amounts of finite, potentially scarce products and sells them for a profit. So does the hardware store owner, the pawnbroker, and so on. But no one seems to be outraged by the idea of a business selling food, tools, or jewelry in the event that supplies are low and the particular item that a customer wants is nowhere to be found. An argument against ticket scalpers by a person who accepts the aforementioned is invalidated by contradiction.

Next, we should consider that the very nature of ticket sales makes scalping possible and profitable. Any ticket price above the market clearing price will result in unsold tickets (which sports teams strongly wish to avoid), any ticket price below the market clearing price invites scalping, and trying to calculate the exact market clearing price in advance is impossible. As teams would rather err on the low side of the market clearing price, there tend to be more people demanding tickets than there are tickets available. This leads to rising prices, which correct the imbalance. The act of scalping is simply a market force acting to correct imbalances in supply and demand.

Some people will argue that scalpers are responsible for high ticket prices, but this is merely a result of arithmetic, and would happen with or without dedicated scalpers speculating on tickets. Suppose, for an example similar to the case at hand, that Panthers tickets are selling for an average of about $130, there are 12,500 tickets for sale, and 25,000 people want a ticket. To avoid distributing tickets without price rationing, which would result in tickets being made available in an arbitrary and discriminatory manner, prices must rise to a level where only 12,500 people still want them. This level may be around $500 in this case. How this $370 per ticket increase is distributed is what will vary from case to case. In this case, 7,000 tickets were sold for an average of about $130 each, while the other 5,500 tickets are being sold for much more by scalpers. In another case, scalpers may be allowed to buy all available tickets and apply the increase uniformly to all tickets. But in this case, 7,000 tickets for $130 each, a market clearing price of $500, and 5,500 tickets sold by scalpers results in an average scalper price of $970.91.

Finally, there is the argument that ticket scalping benefits the rich at the expense of the poor. The opposite tends to be true. For the poorest people, scalping is an easy way to make a large return on a relatively small investment. For people of middle-class means, paying a scalper a higher price is the overt cost, but there is also the hidden cost of not having to take time off of work to stand in line for a ticket. The rich tend to have less use for scalpers, as they can more easily afford season tickets, which automatically lead to playoff tickets in this case, and they can afford to hire a servant other than a scalper to stand in line for a ticket.

So the next time you see a ticket scalper, may you not only hold back your outrage, but thank them for the services they perform in the marketplace.

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