Welfare Effects of Ticket Resale: A Game Theoretic Analysis (2014)
Undergraduate: Yebei Lin
Faculty Advisor: Sergio Parreiras
Department: Mathematics
The concert ticket business consists of two players, the primary ticket seller and the scalpers. Ticketmaster is the dominant primary ticket seller. It has attempted several projects in hopes of breaking into the secondary market. In this research, we first investigate its merger with Live Nation, a concert promoting business. Many opposed the merger due to the combined company¿s control of ticket sales and concert venues; however, the merger was approved by the U.S. Department of Justice in 2010. The word ¿scalper¿ is usually associated with sketchy men standing outside venues selling tickets at exorbitant prices. Through the increasing presence of online ticketing, scalpers are now equipped with new technology. Consumers have to compete with ¿ticket bots,¿ virtual robots programmed to buy up tickets to be sold at a higher price. The secondary ticket market is currently a four billion dollars a year business. The research in this project also examines the welfare effect of ticket resale under demand uncertainty. In our research, we model the ticket buyers, which include ticket scalpers and regular consumers, as a mixed distribution: scalpers are consumers whose valuation for the ticket coincides with its resale value. We compare the results with existing research that only model consumers without resale opportunity. After solving for the equilibrium of the ticket selling game, we will determine under which conditions should there be legal restrictions limiting ticket resale.