“Can Musicians and Fans Benefit When a Primary Ticket Platform Controls the Resale” by Mr. Tianxin Zou
Mr. Tianxin Zou
Ph.D. candidate in Marketing
Olin Business School
Washington University in St. Louis
Consumers can buy firsthand concert tickets from primary platforms (e.g., Ticketmaster). If they find themselves not being able to attend the concert after buying tickets, they can resell their tickets to other consumers on resale platforms (e.g., StubHub). Recently, Ticketmaster has also been developing its resale business and attempting to control the resale market by blocking consumers from reselling on competing resale platforms. Many states in the U.S. have passed laws requiring consumers should be able to freely resell tickets on any resale sites, worrying that Ticketmaster's control of both the primary and the resale markets will lead to increases in its service fees in both markets, which reduces consumer surplus. However, we establish a game-theoretic framework and show that the opposite can happen: when Ticketmaster also controls the resale market, the service fees on both the primary and the resale markets can decrease, so consumer surplus can increase. This is because Ticketmaster tends to lower the primary-market service fee to attract more buyers in the primary market. Hence, there will be more consumers who cannot attend the concert and resell their tickets, which increase the resale market profit. Ticketmaster also tends to lower the resale-market service fee to make reselling tickets less costly when a consumer cannot attend the concert, which induce more consumers to buy tickets from the primary market. We also find that, when the primary platform controls the resale market, the presence of a small group of scalpers can counterintuitively reduce the final ticket prices and increase the musician's profit and the consumer surplus. Using data from Ticketmaster.com and StubHub.com, we provide some suggestive empirical support for the theoretical predictions.