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Chunyun and the problem of ticket scalpers

Chunyun, or literally “spring traffic”, refers to the huge traffic flow during Chinese lunar new year (spring festival). Due to the gap of development levels between major cities like Beijing and Shanghai and the rural parts of China, millions of young people chose to come to the cities in search of better opportunities. During Chinese New Year, those workers often seek to visit their parents or other family members in their hometowns, creating significant traffic problems in the process. Because a lot of these worker chose to take the train, people known as the “ticket scalpers” often bought the tickets early on at retail price (sometimes even before the tickets went on sale for the public) and resold them for a profit. In response to this, the Chinese government chose to adopt the real-name system for railroad tickets. Under this system, the only person who can use a ticket is the one who actually bought it from a legitimate retailer, rendering the tickets from the ticket scalpers useless.

This news article resonates with the idea of “matching market” and perfect market clearing price. The Chinese government seeks to regulate the market by setting a specific price for the train tickets (the government comes under a lot of criticism for even slightly adjust the ticket price, since the buyers of these ticket are often blue-collard workers who are not well off). However, since the price is set too low to be the market clearing price, it results in a bottleneck where the price of the tickets is way lower than their values to almost everyone. The ticket scalpers “solved” the problem by reselling those tickets at a higher prices, eliminating those who value the tickets at a lower price than the scalpers are charging. In this scenario, the most effective way to eliminate the tickets scalpers may not be the real name system (Indeed, if the scalpers can get their hand on the tickets even before they are officially on sale, it is equally likely that they can forge the names on the tickets). Instead, the government might benefit from raising the retail price of the tickets. Although this might not be a popular measure, raising the ticket price to a market clearing price may eliminate the demand for these tickets and give the remaining buyers at least a fair chance to compete for these tickets instead of resorting to ticket scalpers. Furthermore, if the retail price is higher than what the ticket scalper can resell them for, the ticket scalpers would simply quit ticket-scalping since doing so yield them no profit at all. The bottom line is that railway tickets, like most consumer goods, is dictated by supply and demand of the market. If the government is not willing to adjust the price that correctly reflect the market, chances are the prices will adjust themselves in ways that the government is not willing to see.




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October 2015