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Arbitrage, Speculation, and Public Policy Toward Ticket Scalping

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  • James L. Swofford

    (University of South Alabama)

Abstract

Ticket scalping is typically analyzed from the point of view of the demanders of the product. The question of why a profit-maximizing producer would let someone purchase its product for speculation or arbitrage has typically been ignored in the literature. There are at least three reasons why a profit-maximizing firm might permit purchase of its product for resale. One reason is that uncertainty and risk aversion on the part of the firm provides an opportunity for speculation in the product by a less risk averse firm. A second reason is that the producing firm may face different cost functions than the ticket scalper, permitting arbitrage or a middleman to exist and make a profit. The third reason is that the dynamic revenue function of the firm may differ from the ticket scalper's revenue function, creating an arbitrage opportunity. Finally, a public choice perspective suggests that producers are the likely source of inspiration for laws against ticket scalping.

Suggested Citation

  • James L. Swofford, 1999. "Arbitrage, Speculation, and Public Policy Toward Ticket Scalping," Public Finance Review, , vol. 27(5), pages 531-540, September.
    • Handle: RePEc:sae:pubfin:v:27:y:1999:i:5:p:531-540
    DOI: 10.1177/109114219902700504
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    References listed on IDEAS

    as
    1. Alchian, Armen A & Demsetz, Harold, 1972. "Production , Information Costs, and Economic Organization," American Economic Review, American Economic Association, vol. 62(5), pages 777-795, December.
    2. Becker, Gary S, 1991. "A Note on Restaurant Pricing and Other Examples of Social Influences on Price," Journal of Political Economy, University of Chicago Press, vol. 99(5), pages 1109-1116, October.
    3. Leland, Hayne E, 1972. "Theory of the Firm Facing Uncertain Demand," American Economic Review, American Economic Association, vol. 62(3), pages 278-291, June.
    4. Silber, William L, 1984. "Marketmaker Behavior in an Auction Market: An Analysis of Scalpers in Futures Markets," Journal of Finance, American Finance Association, vol. 39(4), pages 937-953, September.
    5. George A. Akerlof, 1970. "The Market for "Lemons": Quality Uncertainty and the Market Mechanism," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 84(3), pages 488-500.
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    Cited by:

    1. Joris Drayer & Daniel A. Rascher & Chad D. McEvoy, 2012. "An examination of underlying consumer demand and sport pricing using secondary market data," Sport Management Review, Taylor & Francis Journals, vol. 15(4), pages 448-460, October.
    2. Larry Karp & Jeffrey M. Perloff, 2005. "When Promoters Like Scalpers," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 14(2), pages 477-508, June.
    3. Eichhorn, Christoph & Sahm, Marco, 2010. "Why were FIFA World Cup tickets so cheap? Monopoly pricing, demand quality and two-sided markets," Journal of Economic Psychology, Elsevier, vol. 31(2), pages 212-217, April.
    4. Phillip Leslie & Alan Sorensen, 2009. "The Welfare Effects of Ticket Resale," NBER Working Papers 15476, National Bureau of Economic Research, Inc.
    5. Pascal Courty, 2003. "Some Economics of Ticket Resale," Journal of Economic Perspectives, American Economic Association, vol. 17(2), pages 85-97, Spring.
    6. Xuanming Su, 2010. "Optimal Pricing with Speculators and Strategic Consumers," Management Science, INFORMS, vol. 56(1), pages 25-40, January.

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