Saturday, 24 September 2016

Why you shouldn't take economic advice from a comedian.

From comes this news story:
One of the hottest comedians in show business is warning fans not to buy or resell overpriced tickets to his upcoming shows — because he might just cancel the tickets.

Louis C.K. announced Tuesday that the West Coast city would be the only Canadian stop so far on his forthcoming North American tour.

The award-winning funny man will play the 6,000 seat Thunderbird Arena for two nights on Dec. 7 and 8. And once again he was capping prices well below average for a top notch show.

"As always, I'm keeping the price of my tickets down to an average of $50, including all charges," he said in an email blasted out to fans to announce the dates. "I know that's not nothing. But it's less than more than that."

Somewhat predictably, tickets were sold out with minutes, leaving desperate fans searching online for seats at the show.

And that's where the warning comes in.

It turns out C.K. has a long-standing beef with scalpers and resellers, and he takes personal pride in jamming their attempts to profit from his shows.

"Regarding ticket resale: we take great efforts and have many methods of finding out what inventory is being sold on broker sites like Stubhub and Vivid Seats and immediately invalidating those tickets," he declared on his website.
Now this guy may be great at being a comedian but he is a crap economist. If the quantity demand is greater than the quantity supplied the price rises to clear the market. Now Louis C.K. may not like this bit of basic economics but that doesn't stop it from being true. The reason that you see scalpers is simply that the ticket price is below the market equilibrium price. So if he wants to prevent scalping he just needs to increase the price of tickets.

But from the above you see that he wants to keep "the price of my tickets down to an average of $50". Low price implies below equilibrium pricing which in turn implies scalping to get tickets into the hands of those who value them most. That is, his own pricing policy creates scalping. An insolvable problem?

What to do? If he won't increase the ticket price does he have live with scalping? Actually no, there is a very obvious solution to this. All he has to do is increase supply. As supply increases the price will be driven down. So to get a $50 price with no scalping all he has to do with play a bigger venue or put on more shows, or both. These things will increase the supply of tickets which will decease the price until, if he gets the supply just right, the equilibrium price is $50. And, of course, there will be no scalping. Problem solved!


Jim Rose said...


Paul Walker said...

I don't see this as a long-run equilibrium the monotring and enforcement costs are too high.