Living Economics

Excess Demand Blues - Scalpers profit from ticket shortage
Joseph Clara
Excess demand generated by low concert ticket price created profitable opportunity for scalpers.

Last summer I saw that my girlfriend’s favorite musician Norah Jones was going to be performing at the Orpheum here in Memphis. I thought she would be excited if I could get tickets for us to go to the show. Apparently I didn’t realize how popular this performer was and her concert sold out on the first day before I could buy any tickets. All the tickets were initially sold for $45 apiece, despite the seating section. I was disappointed but I just forgot about it. Later I browsed on eBay.com to see if there was anyone selling them there. It turned out that there were over a dozen people selling the concert tickets there. The prices were outrageous (some around $400 or $500), so I tried to negotiate for a price I could afford, but was not successful.

Normally I would have given up, but I knew that my girlfriend would really want to go to the concert. I decided to wait and see if there would be any scalpers selling tickets on the day of the concert. I went down to the Orpheum with my brother on the morning of the show and found a lot of people with tickets for sale. I ended up purchasing a pair for double the initial price from a person who had a bundle of tickets he was trying to sell. They cost more than they did originally, but less than those on eBay.com. I surprised my girlfriend with them and we went to the concert, and everyone was happy.

Excess demand occurred because all the tickets were priced at $45 apiece. There were many people willing to pay $100 and more per ticket. I saw some pay five times the original price of $45 on eBay. Because the original price at $45 was too low, the quantity demanded exceeded the quantity supplied and a shortage was created. To clear the market, the theatre should have sold the scarce number of tickets at a higher price. At least they should have sold tickets at various prices according to preferred seating sections to move closer toward market clearing. Selling the tickets at too low of a price allowed many people to see the show for $45 while people who wouldn't mind paying more just had to miss out. After the entire quantity of tickets supplied was sold at $45 apiece, quantity demanded still remained at various price levels which were above the initial $45 level. Scalpers, by raising the price to market-clearing levels, raked in profits that could have gone to the original ticket sellers.

Note:
  1. Joseph Clara is an undergraduate economics major at the University of Memphis.
  2. Joseph Clara is an undergraduate economics major at the University of Memphis.
Access Tools
• Advanced Search
• Browse Micro
Comparative advantage (14) Competitive strategy (27) Costs and opportunities (53) Entrepreneurship (3) Externality (28) Free Market Solutions (17) Free Ridership (3) Game Theory (22) Incentives (13) Income Distribution (25) Information (19) Labor Market (24) Marginal optimization (33) Market Demand (17) Market Entry (9) Market Exit (2) Market Intervention (12) Market Structure (29) Market supply (4) Material Flow (2) Miscellaneous (3) Price Discrimination (17) Pricing Strategy (46) Profit maximization (48) Property Rights (42) Regulation (16) Rent Seeking (2) Risk Taking (12) Scarcity (10) Tastes & Preferences (27) Taxes (7) Technology (9) Type of goods (31) What Price Means (27)
• Browse Macro
Boom and Bust (9) Budget Balance (12) Comparative advantage (13) Economic Development (1) Economic Indicators (6) Fiscal Policy (12) Incentives (1) Income and output (25) Income Distribution (5) Labor Market (6) Money and Credit (20) Regulation (5) Rent Seeking (1) Saving (6) Taxes (4) Technology (1) Trade and Foreign Exchange (30)
• Glossary
List All
Search

• Microeconomics Lectures • Macroeconomics Lectures
Instructor
• Instructor Log in • Sample TOC • Demo/Register • Video Tour
Student
• Student Log in
Close
Instructor Log in

Class
Close
Student Log in


Open Menu
Term
Definition