Michigan's ticket market: To control or protect?

Reuters

U.S. Rounseville, dressed as Uncle Sam, holds a sign asking for tickets before Game 1 of the World Series between the Red Sox and St. Louis Cardinals at Fenway Park in Boston on October 23, 2004.

When state Rep. Douglas Geiss, D-Taylor, wrote recently that he would like to "start a discussion" about limiting the resale prices of sports and entertainment tickets ("Bill would limit markup on ticket resales," The Detroit News, July 27), what he really meant to say is that he thinks he somehow knows better than Michigan consumers what tickets should be worth.

Instead of the "safer fan environment" that Geiss refers to, his bill would actually create the opposite. His legislation would expose average fans to more unregulated transactions on the street and provide them with fewer protections for their ticket purchases in the ticket resale market.

If successful, Geiss will legislate the maximum mark-up on secondary ticket market resale websites to 10 percent over the face value of the ticket — because of what he calls "legalized scalping" taking place online in legitimate resale websites. Geiss failed to mention that on the same websites that he criticizes, consumers can also find thousands of tickets to sporting events that are significantly lower than the face value.

"The frequent availability of tickets below face value demonstrates the economic reality that ticket prices, like other commodity products, are determined by the market forces of supply and demand — not by ticket "scalpers."" -Mark J. Perry

For example, this past season basketball fans in Michigan had numerous opportunities to use legitimate secondary resale websites and purchase prime game seats — at a fraction of their face value — to watch the Detroit Pistons play top-caliber professional teams. The frequent availability of tickets below face value demonstrates the economic reality that ticket prices, like other commodity products, are determined by the market forces of supply and demand — not by ticket "scalpers."

Geiss went on to imply that the secondary ticket market is somehow unsafe and unscrupulous, describing the market as "usurious" because some tickets sell at 10 times their original value. But tickets can only sell at 10 times face value when there is huge fan demand for a limited number of available tickets. The underlying market forces that produce such high ticket prices won't change if Geiss' legislation is passed to artificially cap prices, and a secondary market for scarce tickets will still exist in some form.

The fact is economic history teaches us that artificial, government-mandated price controls never work. In this case, ticket price caps wouldn't eliminate the secondary ticket market, but would simply drive it underground or out into the street, where consumers will not have the current protections and conveniences that are provided by legal ticket commerce.

If government price caps become law, many consumers will be forced to buy tickets for cash in potentially risky transactions from strangers rather than through a safe, convenient and legal online marketplace.

This summer, state Sen. Joe Hune, R-Hamburg Township, and state Rep. Kevin Cotter, R-Mount Pleasant, introduced legislation that would protect free-market competition in the secondary ticket market by banning some anti-consumer, monopolistic ticketing policies being practiced at an increasing number of Michigan venues. Their argument is that Michigan fans deserve fair and unencumbered access to tickets for concerts and sporting events, and that when consumers buy tickets, they own them and don't forfeit their right to subsequently transfer, donate or sell their tickets.

Hune and Cotter's legislation would also protect ticket buyers by requiring ticket resellers to provide refunds for any fraudulent tickets, operate call centers to assist customers, and ensure that fans have access to face-value tickets by banning the use of ticket-buying software that allows some brokers to leapfrog ahead of online buyers and purchase large blocks of tickets for high-demand shows in a matter of seconds. By strengthening property rights for ticket holders and increasing other protections and services, this legislation would make the secondary market for tickets operate more efficiently and provide significant benefits for consumers.

In contrast, if Geiss' legislation prevails, some tickets will still sell for far above face value when fan demand is high, but the consumer will have fewer safe options to buy and sell tickets on the secondary market and will be exposed to more inconvenience, fraud and theft. That sounds to me like a one-way ticket to the back of the line.

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About the Author

 

Mark J.
Perry
  • Mark J. Perry is concurrently a scholar at AEI and a professor of economics and finance at the University of Michigan's Flint campus. He is best known as the creator and editor of the popular economics blog Carpe Diem. At AEI, Perry writes about economic and financial issues for American.com and the AEIdeas blog.

    Follow Mark Perry on Twitter.


  • Phone: 202.419.5207
    Email: mark.perry@aei.org

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