Friday, 4 November 2016

Good and bad news on the Parker fight

From Sam Richardson's Fair Play and Forward Passes blog comes some good news and some bad news with regard to the Joseph Parker fight. It turns out that despite what we were hearing last week that the fight was most likely to go overseas it will in fact take place in Auckland. Duco withdrew their application for government funding and so no central government money will be put into the fight.

First up the bad news, Sam Richardson writes,
It is not 100% privately funded, though. One of the backers of the Parker camp is the Auckland City events arm ATEED, so there are already taxpayer dollars being funneled into the fight.
Auckland ratepayers will be the losers here. As Sam writes,
Now that the fight is taking place in Auckland, the question becomes whether the fight will generate economic benefits for the city and for New Zealand. In short, the benefits are likely to be confined to Auckland city and are not likely to spill over outside the city boundaries. The extremely short-term nature of the event itself will likely mean that any impact is short and sharp - don't expect longer-term economic impacts - even if Parker happens to win the fight.
Now for the good news,
In the Takam fight, Duco auctioned off 520 general admission tickets at $1 reserve on TradeMe. The intention of this experiment was an attempt to eliminate the possibility of scalping occurring with these tickets - people buying cheap and selling at higher prices.

With interest in this fight likely to be significantly greater than what it was for the Takam fight, it will be very interesting to see if Duco try it again. If anything, they have more to gain from giving it another go - one would expect the willingness to pay for a title fight to be much greater than for a build-up fight. Yet there is always a risk that they may not make the money that they are seeking - but they are likely to sell the tickets and fill the venue. At the same time, charging a fixed price is not a sure bet either - people might decide that the price is simply too steep and there could be empty seats as a result. There is also the possibility that the price might be set too low - and scalping could occur.
The use of an auction would be a great way to generate money for the promoter and deal with scalping. The reason for scalping is that tickets are, for whatever reason, priced at less than the market rate. Given that, it is obvious that money can be made by buying cheap and selling dear. That is, some people will be willing to pay a lot to get to go to the fight and scalpers who buy at the "official" price can resale to these high willingness to pay people at a much higher price. By auctioning off tickets Duco can capture most of the rents that the scalpers would otherwise get and in the process maximise the revenues they get from the fight. Note that this means there is less of a need for any public funding of the fight.

Basically what Duco would be doing is capturing the surplus that consumers would otherwise get if they were to buy at the lower "official" price - what economists call consumer surplus - via price discrimination. Duco can charge different people different prices. An auction is a way of getting people to reveal their willingness to pay.

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