Working Paper: NBER ID: w23770
Authors: Aditya Bhave; Eric Budish
Abstract: Economists have long been puzzled by event-ticket underpricing: underpricing both reduces revenue and encourages socially wasteful rent-seeking by ticket brokers. This paper studies the introduction of auctions into this market by Ticketmaster. We first show theoretically that Ticketmaster’s auction design, a novel variant of position auctions, has attractive efficiency, revenue and no-arbitrage properties. Then, by combining primary-market auction data from Ticketmaster with secondary-market resale value data from eBay, we show that the auctions “worked” in practice: on average, they eliminated the arbitrage profits associated with underpriced tickets. We conclude by discussing why, nevertheless, the auctions have failed to take off.\n\n“It is nevertheless true that gangs of hardened ticket speculators exist and carry on their atrocious trade with perfect shamelessness.” —New York Times Editorial (1876).
Keywords: event tickets; auctions; ticketmaster; market design
JEL Codes: D44; D47
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| introduction of auctions (D44) | price discovery in the primary market (G10) |
| price discovery in the primary market (G10) | increased artist revenues (Z11) |
| introduction of auctions (D44) | elimination of arbitrage profits (G19) |
| auction prices (D44) | alignment with secondary market values (G10) |
| experienced bidders (D44) | modest resale profits (D43) |
| experienced bidders (D44) | lower profits than fixed-price scenario (D49) |
| auction prices (D44) | better revenue outcomes (H27) |
| auction mechanisms (D44) | mitigation of underpricing (D47) |
| auction mechanisms (D44) | reduction of rent-seeking behavior (D72) |