Scalping and its legal aspects
Arguments for banning scalping
Consumer detriment and dissatisfaction: Consumers face adverse impacts of ticket scalping. The impacts may be either non-financial and financial detriments or dissatisfaction amongst consumers. Often, scalping might erode the consumers’ confidence and satisfaction for various reasons including being pestered by the unauthorized scalpers outside the event venues, lack of transparency in distributing tickets, and unfair access to the available tickets (Harvey n.d., p.1). This implies that consumers may encounter the detrimental effects of buying non-transferrable, non-authentic, and worthless on-sold tickets.
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Scalping presents various detriments to suppliers or event promoters. For instance, it is very difficult to trust the genuine tickets sold through scalping. Therefore, refusing to admit consumers bearing tickets whose par value is higher than the original face value requires promoters to incur additional costs as they try to enforce certain conditions on scalping. An increase in cost is likely to cause a loss in revenue. Further, scalping might result in inflated prices which might make event fans to be locked out of the market. This may yield negative publicity for the promoters which may, in turn, cause the promoters to lose their reputation (Harvey n.d., p.1). Fans locked out of an event due to scalping may have their goodwill affected when their confidence is eroded by scalping practices.
Arguments against banning scalping
Ticket scalping generates some benefits to the consumers and these include:
- Capacity to transfer tickets: Thus, scalping provides an opportunity for consumers who have no interest or who are incapable of attending certain events to unload the acquired tickets through on-sell.
- Ticket market convenience: Consumers through scalping have been able to make ticket purchases at a premium and possibly obtain the preferred seats. Scalping, in this regard, offers convenience and time for consumers having higher opportunity cost of time but prefer securing event seats at higher prices.
- Improved ability to secure the events tickets: Purchasing scalped tickets is a form of the transaction since consumers only purchase the event tickets from the on-sellers at some mutually agreed prices. The practice may help consumers to secure highly sought after and unobtainable events tickets.
Events promoters can derive mutual benefits from scalping. For example, the promoters may decide to charge low prices on the tickets to warrant the generation of a certain level of revenue. The reason could be to trade off the associated risk of charging higher prices which could be bored by those who engage in scalping (Harvey n.d., p.1). Moreover, by participating and competing with the scalpers in the secondary market, promoters can generate resale revenues.
In conclusion, therefore, other than banning scalping, the endeavor should be geared towards balancing the fair consumers’ access to events ticket while the organizers fulfill their desires to generate potential revenues and controlling ticket pricing. In fact, any measures intended to control ticket scalping might yield potential consequences to all the partaking parties.
Price discrimination (PD)
Price discrimination is exercised in the Computer hardware and software industry by firms like Dell. On their website, Dell requires prospective customers to identify with a specific segment. Evidently, the price of a specific device depends on the business segment the buyer is in. The home users segment is getting products at the cheapest prices while the large business entity gets the same products at the highest price.
PD may exist as long as three conditions are satisfied: buyers vary in their demand for a commodity in question, a supplier has market power and the supplier can limit arbitrage. If buyers had similar demands for a commodity, then all buyers would demand a similar amount of the commodity for each price. The price and quantity of the commodity will only be influenced by the number of buyers in the market and the capacity of the supplier to supply the commodity. If suppliers have no market power the theory of perfect competition means that all commodities would be offered at a single price (Phlips 1983, p.98). If buyers can arbitrage price discrepancies, the suppliers’ attempts to charge premium prices to some buyers would be overcome by resale.
Monopoly and monopolist’s profit-maximization are the concepts behind price discrimination. When a supplier controls a monopoly, he obtains the whole social surplus, and hence profit maximization is the same as maximizing social welfare. Price discrimination may also occur during the existence of pure-strategy Nash-equilibrium in quantities whereby the allocations are completely determined by marginal-cost pricing on the basis of the supplier’s residual demand curve. Firms that price discriminate is prone to endure losses. This is because the spirit of monopolistic competition leads to the introduction of the fixed cost of production and allow the entry of new firms to drive profits to zero.
Harvey, A, Angry fans in jam after scalping, Web.
Phlips, L 1983, The Economics of price discrimination, Cambridge University Press, London.