A week or two ago I discussed a blog post on scalping by an economist named Eric Crampton.  I called him British; he’s actually a Canadian teaching in New Zealand. The original post is below.

he and a colleague were kind enough comment on a couple of issues. One was my precis of what he meant by the concept of “clearing.” I glossed it as ““everything selling for the top price people will pay for it.”

The colleague, Paul Walker, wrote:

Demand curves slope downwards so the market clearing price will be such that only the marginal person will in fact pay what they actually think the ticket is worth. All intra-marginal consumers will pay less than what they think the ticket is worth. That is, they will pay less than their maximum willingness to pay. Your statement would be true under first degree price discrimination, but we just don’t see that in practice.

(He also discusses this more on his own blog, here.

The really interesting question the original post raised was why tickets aren’t sold at market prices.

A British Canadian economist, Eric Crampton, discusses scalping here. When he talks about “market clearing” he means “everything selling for the top price people will pay for it,” and in his world that’s how things not only should work, but do, which is why scalping takes place and “clears” the tickets appropriately.

I respect that position but don’t agree with it. Some of these free market types: You’d think a little kitten dies if every goddamned thing in the world isn’t sold at top price.

But I do have some observations to make about other conundra he ponders.

For the first, there’s too much hand-wringing over why tickets aren’t priced higher than they are. Of course it’s because rock stars don’t like the image of charging $500 or $1000 for tickets.

That was 1963, and the idea has been a key part of the rock ‘n’ roll ethos ever since.

But it’s really a larger issue than that. Very few entertainment options in American life aren’t subject to scalping, from sports to Broadways shows, which means that few of these are priced appropriately outside of the broad tiered pricing we are all familiar with. (I don’t know how things are in England.)

In some venues, the practice has been scaled back: Not too many movie theaters have that pricier loge seating. More often, as in rock shows and on Broadway, though, there has been a move to monetize the very best seats.

Still, it’s been done fairly quietly; and the press, as Hitsville has charted variously, goes along with it for the most part, parroting producers’ claims that the price hikes are all about “flexibility” or “consumer choice.”  (Just as Ticketmaster execs use euphemisms like “dynamic pricing” for higher ticket prices or refer to scalping as “the secondary market.”)

In other words, the main reason entertainment tix in the U.S. are not all sold at their full market value is that there is a long-standing cultural distaste for that practice.

Secondly, again trying to come up with a sober explanation of why an artist would sell a ticket for less than its market price, Crampton postulates:

I can buy that the artist would want the most enthusiastic fans up at the front rather than the boring folks who can afford to pay $1000 per ticket. Giving an economics lecture is a lot worse if the students up front seem less interested than you think they ought to be, and I’d fully expect that the effect is greater for musicians. Why shouldn’t they trade off some monetary income for being able to put on a show that’s more fun for them?

As is explicit in Trent Reznor’s detailed explanation of how he tries to thwart scalpers, the issue is more rewarding one’s supposed “true fans” than trying to buy a little enthusiasm in the front rows, which is always there no matter what. With very rare cases, everyone in the front section of every show I’ve ever gone to is, if anything, too enthusiastic.

In those case, I’m the guy with the free ticket who just wants to watch the show, and I’m invariably surrounded by inebriated frat boys yelling “Roxanne!” or “Rosalita!” They are the ones who paid top price at the least and, at the most, several times top price to a scalper to get up front and holler.

High ticket prices have had the effect of making it virtually impossible for anyone to admit they saw a bad show—you’d feel like an idiot after having paid more than $100!