rascher paperless ticketing presentation - consumer
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PaperlessTicketinganditsAntitrustImpactontheSecondary
Market
DanielA.Rascher,Ph.D.UniversityofSanFrancisco
OSKR,LLCAndrewD.Schwarz
OSKR,LLC
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WhatisPaperlessTicketing?
Ticketlessentry creditcard/ID seatinglocationslip
Designedtocurbtheresaleoftickets Especiallyabovefacevalue.
Originalpurchaser mustshowuptotheeventandswipetheircard togetsomeonein.
InApril,2010,TicketmasterbeganallowingresaleonitsownsecondarysiteTicketExchange.
Resalecanoccuriforiginalpurchasershowsupandletsnewcustomerin.
TheseticketsshowuponStubHub,TicketLiquidator,TicketsNow(ownedbyTM),etc. Someoftheexchangestrytoremovethem.
ForsomeeventsTicketExchangeistheexclusiveresellersite(convertstopdf) extraroundofsellingintheprocess.
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Agenda
TheProsandConsofTicketlessEntry(orPaperless
Ticketing)
IsMonopolyLeveragingFeasible?
WhatHappenstoCompetitionwithPaperlessTicketing?
ANaturalExperiment MichaelBubl
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Pros&ConsofTicketlessEntry Savespaper? No,seatingassignmentprintedatvenue
Cantloseorforgettickets? Yes,butmobilephoneticketsmaybecomparable
Counterfeit? Dontallowresale
AllowresalethroughTMssitegoingfromcreditcardtocreditcard Currently,platformsguaranteetheticket
Integrateresellerplatformwithprimarysellersite(happensinMLBwithStubHub)
Willresellershowupatvenuewithcreditcardoncetheyhavetakenthebuyersmoney?
Gifts? No,thegrandmaproblem
Speedatvenue? No,slowerlinestogetin verifyingcreditcardstakeslongerthanticketreadersortakers
Groupcoordinationdifficulties? Yes,cantbreakupticketspurchasedingroups(togetgroupofseats). Couldemailthepdf ofeachseattoeachattendeeaheadoftime. Ifonefanneedstosellherticket,shellhavetogetthecreditcardholder
involved.
ReducedAvailabilityofTickets? ResearchQuestion Seabrook(2009)saysthatamountofticketsonsecondarymarkethasbeenradicallyreduced.
ManyplatformswontallowPaperlessTicketstoberesoldbecauseofguaranteedfaceshigherrisk. Generalhighcostofmeetingatthegatetoletsomeonein.
Higherpricesinsecondarymarket? ResearchQuestion Willthehighercostsandincreaseddifficultyleadtofewerticketsavailableandhigherprices?
TMstatesthatitsgoalistoreduceticketresale. Willitalsobeabletomonopolize thesecondarymarket?
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Agenda
TheProsandConsofTicketlessEntry(orPaperless
Ticketing)
IsMonopolyLeveragingFeasible?
WhatHappenstoCompetitionwithPaperlessTicketing?
ANaturalExperiment MichaelBubl
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IsMonopolyLeveragingFeasible?
HowwouldTMmakeanymoneyinsuchacompetitive
secondarymarket?
PaperlessTicketingthatisRestrictedtoTMsResaleSite(s)
AntitrustEconomicsConcept:
BarriertoEntry:
technological
barrier
preventing
competition
raisingrivalscosts,foreclosure,essentialfacility
Turnsacompetitivemarketintoamonopolisticone.
SoWhat?
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Agenda
TheProsandConsofTicketlessEntry(orPaperless
Ticketing)
IsMonopolyLeveragingFeasible?
WhatHappenstoCompetitionwithPaperlessTicketing?
ANaturalExperiment MichaelBubl
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SecondaryMarket
CompetitiveMarket:CS=$108,000,PS=$0,W=$108,000MonopolisticMarket:CS=$27,000,PS=$54,000,W=$81,000
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Agenda
TheProsandConsofTicketlessEntry(orPaperless
Ticketing)
IsMonopolyLeveragingFeasible?
WhatHappenstoCompetitionwithPaperlessTicketing?
ANaturalExperiment MichaelBubl
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EmpiricalFindings MichaelBubl
Ticketmastersoldsomesectionswithtraditionalticketing
optionsandusedPaperlessTicketingforcertainsections.
NaturalexperimenttocomparetraditionaltoPaperlessTicketing
controllingforvenue,performer,relationshipacrossnearbyseatlocations(withandwithoutPaperlessTicketing)
LadyGaga,DaveMathews,KingsofLeonwerethecontrolgroups
Data:TM,SH,RazorGator,TicketCity,TicketLiquidator,TicketsNowtakendirectlyoffoftheirwebsites.
VerizonCenter,WashingtonD.C.,11/27/10
TDGarden,Boston,11/30/10
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EmpiricalFindings MichaelBubl
VerizonCenterPaperless
Conventional
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EmpiricalFindings MichaelBubl
Paperless
Conventional
TDGarden
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EmpiricalFindings MichaelBubl
ThePaperlessTicketMarkethadMuchLowerQuantityAvailableforResale
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EmpiricalFindings MichaelBubl
RatioofTicketsforResaleforPaperlessTicketingandConventionalTicketing
FewerPaperlessTicketsarebeingresold itsworkingasTMintended
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EmpiricalFindings MichaelBubl
MarkuponPaperlessTicketingTicketsforResalevs.ConventionalTicketing
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EmpiricalFindings MichaelBubl
MarkuponPaperlessTicketingTicketsforResalevs.ConventionalTicketing
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EmpiricalFindings MichaelBubl
EmpiricalModelofSecondaryMarketTicketPrices(indollars)
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EmpiricalFindings MichaelBubl
EmpiricalModelofSecondaryMarketTicketPrices(innaturallogarithms)
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Conclusion Upstreammonopolistcannotgainmaximumprofitsby
simplypricingproperlyupstream.
Incentivetomovedownstream
Attemptstomonopolizethedownstreammarketwitha
technologicalbarrier,raisingrivalscosts.
Thisincreasestransactioncosts,decreasesquantity
supplied,andincreasesprice.
Whenresale
isharder Itlikelyhurtsprimarymarketdemand
Moreticketsgounused(preventingParetoimprovingexchanges),
loweringancillaryrevenues.
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DoesthePrimaryMarketBenefit? Williams(1994)showsthatmarketsthatallowresalehavehigherprimarypricesinthe
NFL(byabout$2).
Depken (2006)showsthatcitiesthatdonot allowresale,averageseasonticketprices
arehigherbyabout$10 teamrevenues. Sweeting (2008)findsthatMLBcities(20002007)withthemostlistingsandhighest
secondarymarketpricesarethosewiththehighestrealizedattendances. Also,higher
demandgameshavemoreticketsavailableinthesecondarymarket.
Spindler (2003)arguesthatSMMsincreaseprimarydemandbecausetheyhave
differentrevenueandcoststructuresallowingthemtomakemoney.
Courty (2003)saysthatSMMsselltohigherincome/moreuncertainbuyersright
beforeeventoccurs. SMMsactasprimarysellerssalesagent.
KarpandPerloff (2005)andGeng etal.(2007)notethatSMMshelpprimarymarket
sellersearnprofitsassociatedwithpricediscrimination. Thiscanbenefittheprimarysellerandconsumers.
Thiel (2003)notethateffortstopreventsecondarymarketssimplyraisethecostof
resellingandbenefitnoone.
Leslieand
Sorenson
(2007)
primary
market
sellers
revenues
decline
with
revenues
capturedbyresellers. Notethattheyassume primarymarketpricesareexogenousand
consumersconstitute45%ofresoldtickets,notprofessionalresellers.
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PrimaryMarketMonopolistSetsFees,notPrices
T=FixedFee:P*m=50+T/2,T*m=$50, =$375K.tP=ProportionalFee:t*m=0.67, =$375K.
*
mP
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WhydoestheSecondaryMarketExist? Pricesbelowmyopicmonopolypricing rewardtruefans,value
buzz,ancillaryrevenues,greatexperienceforfans(repeatcustomersandbuyersofcomplementaryproducts/mp3s),riskaversioncausewantasellout. (KruegerandPray,2008)
Experiencegoods oftenhavelowerpricesbecauseoftheasymmetryofwhatisactuallybeingpurchased(Krueger,2005)
Coarsepricing atvenues(oftenjust2or3differentprices). (LeslieandSorenson,2007).
ExcessDemand secondarymarketsfacilitateParetoimprovingtransactions.
Scheduleschange evenifperfectpricediscriminationoccurred,thetimelapsebetweenpurchaseandconsumptioncancausepersonaldemandtochange. Secondarymarketsareaformofinsurance(Courty,2003;Drayeretal.,2008).
Differentialcostandrevenuefunctions ofresellerscomparedto
primaryseller.
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SecondaryTicketingandPricing
Generalneedforcompetitioninsecondarymarket
Elfenbein (2006)showsthatinmarketswithantiscalpinglaws,there
arefewersecondarymarkettransactions,fewerresellers,higher
concentration,andhigherresaleprices,analyzingover400,000NFL
transactionsoneBay.
Welfare
Courty (2003),Spindler (2003)showefficiencygainsfromsecondary
marketsandprimarymarketgainsalso.
LeslieandSorenson(2007)showthattotalwelfare by16%ifsecondarymarketswerefrictionless.
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TheoreticalModelofPaperlessTicketing LinearD
D1:CS=$540K,PS=$720K,W=$1.26MD2:CS=$450K+$90K,PS=$720K+$90K,W=$1.35M
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TheoreticalModelofPaperlessTicketing NonlinearD
D1:CS=$13.50,PS=$9.375,W=$22.875D2:CS=$9+$4.50,PS=$9,W=$27.375
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How
a
Firm
Sets
Fees
in
Primary
and
Secondary
Markets
Monopolist insecondarymarketcouldunilaterallysetfees
unlikeinprimarywheretheyarejointlyset.
EvenifTMcouldmonopolizeandpricetheprimarymarket,
therewouldstillbeasecondarymarket (fromscheduling
issuesanduncertainty)thatTMmightwanttomoveinto. Inprimarymarket,TMchargesafixedfee perticketsold,ora
proportionalfee basedonthepercentageoftheprice,orahybridofthetwo.
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SecondaryMarketMonopolistSetsFees,notPrices
P*m=$87.50,DWL=$4,687.50,pi=$9,375. T*=$12.50
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EconomicIssueswithPaperlessTicketing
Ispreventingticketresalealaudablegoal?
Ifnot,shouldthesecondarymarketbelargelycontrolledby
anupstreamnearmonopolist orconsistofmultiplethird
partyplatforms?
Marketshares
Ticketresale
Welfare
Downstreamintegration
Naturalexperiment
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Details Lessthan10%ofticketsareresold(Leslie&Sorenson,2007)in
music,buthigherinsports(duetoseasontickets).
Thedownstreammarketishighlyfragmented(800+entities)
ThereareplatformslikeeBay,StubHub,RazorGator (someactasbothaplatformandreseller)
TMownedTicketsNowandTicketExchangearesometimes
designated
as
the
only
reselling
platform
when
Paperless
Ticketing
isused.
Individualresellers Sweeting (2008)estimatesthatforMLB,70%ofresellersareconsumers
reselling.
Leslie&Sorenson(2007)estimatethat45%ofresellersinthemusicconcertmarketareindividualsellers.
Secondaryticketpricestendtodeclineaseventapproachesinsports,andareUshapedinmusic.
Betterseatsareresoldmorecommonlythanpoorseats.
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RollingStone,July923,2009
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ProsofResale Possible seasonticketsales
Increasesattendance(Drayer
etal.,2008) Ancillarysales
ExcitementandHFA
Internet
uncertaintyandimprovedmarkets
Usualgainsfromtrade
Harrington(2010)showsthat
whenstatesrepealedanti
resalelaws,quantityoftickets
resoldrosesubstantiallywhile
priceremainedfairlysteady(NHLgames)
ConsofResale Purposefullow pricingcanbe
thwartedbysecondarymarkets
Truefanproblem GaininCSmaybecapturedby
professionalbrokers
Althoughpricescansellfor
belowfacevalue
Botsbuylotsoftickets
TMusestechnologytotryto
preventthis Counterfeitticketsandillwill
towardteam/artist/venue
Onlinesiteshaveguarantees
Technologyisoftenintegrated
with primary seller