Ticket Resale in the Entertainment Industry and the Matching Market
Recently, the globally popular Korean girl group Blackpink released its world tour schedule and the ticket sale for the North American concerts started on September.13th. After the immediate sold out of the tickets, resale tickets appear on various platforms, and the original prices of the first-hand tickets became unknown to everyone other than the buyers. Nevertheless, it is undoubtedly that the resale prices skyrocketed to more than third times higher than the original prices. On vividseat, a ticket resale platform, the minimum price is $279, yet it is reported that the cheapest primary ticket is only $70.
The successful trades of the resale tickets are closely connected to the concept of the Matching Market introduced during the lectures. By definition, the goals of perfect matching are:
- each node is connected by an edge to the node it is assigned to and,
- no two nodes on the left are assigned to the same node on the right
If the bipartite graph has no perfect matching, constricted sets exist. This means that sets S, consisting of some nodes on the right-hand side, are strictly larger than sets N(S), the neighbor sets of S on the left-hand side. To achieve the perfect matching, sets of sellers who are in too much demand need to be found and the prices of their products should be raised to the market-clearing price.
In the case discussed above, the tickets and fans are clearly not perfect matchings. A considerable number of constricted sets exist because a single ticket, especially one that is very close to the stage, is scrambled by hundreds of fans. If the tickets were written on the left column and the fans in demand were in the right column, S would be strictly much smaller than N(S). Graph.1 shows a simplified scenario below, with S =1 and N(S) =3.
Following the theory, the premium of resale tickets occurs to approach the market-clearing prices. In Graph 2, hypothetical resale prices of the same tickets are given. With the increase in ticket prices, for I, II, and III respectively, of $210, $450, and $1200, the valuation of each customer changes. Respectively for fans A, B, and C, the top choices become tickets II, III, and I – the perfect matching is achieved, and these resale prices are market-clearing prices.
The condition discussed above is idealized, and in the reality, it is very likely that the premium would lead to the abandonment of a potential customer instead of a perfect match. Nevertheless, the successful trade of resale tickets can be an appropriate real-life demonstration of how market-clearing price results in perfect matching. Given that the official ticket rates are below the market-clearing price, it seems reasonable for the event organizers – the YG Entertainment Company – to raise their prices, and boycott the secondary markets. However, it seems that the organizers tend to underprice tickets intentionally to ensure a sellout that serves as a validation of the quality of performances. Besides, the intention of an individual to attend the event is positively related to the other consumers’ demands, relatively low prices ensure the popularity of the event among the general public and promote the overall demand. For the event organizers, maximizing the sales volume of the tickets is less risky than maximizing profit compared to anticipating the market-clearing price and maximizing the profit for each deal.
URLs:
http://dx.doi.org/10.1287/mnsc.2013.1862