Friday, August 12, 2011

Buying Scalped Tickets: Timing The Market

Harvard's podcast (HBR Ideacast) recently had an episode regarding the pricing secrets of scalpers. This podcast asks the $65,000 question: How do we get the best deal on the tickets we want?

Scalping is, essentially, dynamic pricing. This means prices fluctuate on how demand is going. And scalpers aren't the only ones that use dynamic pricing. Nay. Our beloved frustrating Chicago Cubs were in fact the first MLB team to implement dynamic pricing for rivalry/marquee games (i.e. Cardinals, White Sox, Brewers) and for lower-demand games during the week or, say, against the Pirates. J.C. Bradbury wrote about dynamic pricing:
This may involve charging a higher price for rivalry games, weekend games, or the latest fad charging more for game-day purchases. All of these adjustments are designed to generate more revenue for clubs by varying the price of the ticket according to changes in fans’ willingness to pay for games.
He also mentions certain economic phrases like price discrimination, consumer surplus — econ talk is sexy — please do checkout that article.

I experienced dynamic pricing in trying to attend the final Cubs v. White Sox game at Wrigley Field. The Sox had already won the BP Oil Spill Cup; I figured since both teams were playing badly (or in the Sox case, below expectation), I figured the demand wouldn't be as high. I completely anticipated an over-supply and/or a lack of demand for tickets.

I scoffed at the idea of buying tickets online.

Like Hannibal, from the "A-Team", I had a plan: time the market just right (wait a couple innings past game time) and get tickets at or near face value. I knew the odds of tickets going below face value were slim, but there was an outside chance of that happening too.

We head to Wrigleyville.

The red line was crowded with overconfident Cubs fans (Helloooo!? We suck this year!). Exiting the Addison stop, we're herded like cattle down the cramped sidewalk. Clark, Addison, Waveland, Sheffield were packed with patrons. I survey the scene which consisted of me walking around Wrigley Field overhearing the prices and talking to scalpers on the street. I needed a benchmark [the market price] for my plan and this was a good way to get it. The stadium was filling up fast. Scalpers were selling tickets double face value. It would be difficult, but I still had faith in my plan.

We head into a local establishment and wait it out.

A couple innings pass and I reenter the streets like Omar walking the projects of Baltimore except not as cool nor intimidating. But to my dismay, I see ticket prices going higher than they were before — triple face value!!!!!!!!

"What in the name of Ben Bernanke has happened?!" I shouted out loud.

Odd.

Maybe I underestimated something. Demand surely decreased — there was less activity (buying, selling) happening around the park. There was less supply now than when we first arrived at the park. Usually a decrease in supply (if demand is constant) will raise the price of a good so this would explain the rising price. But demand was low too. Maybe demand wasn't decreasing at a rate equal to or faster than the decreasing supply — this would have resulted in a new equilibrium price that would hopefully be lower than the original "market" price.

::adjusts nerd glasses::

There had to be a human element to this — something I didn't expect. Thinking about this event post-mortem, I have come up with this conclusion: I talked to scalpers when I first entered the market, a couple of them I talked to more than once. They knew who I was. Therefore, when I reentered the market, they recognized me (I do look like Omar, except not as cool nor intimidating). Recognizing me led them to increase the price. Their leverage was simple: they thought I was desperate and that my demand would be extremely high.

Makes sense.

Except, I wasn't desperate.

At this point, being inside Wrigley was negligible in my eyes (I already missed two innings). I know the difference between price and value and I know the best seat "in" the house that provides the best value. I just wished I would've thought about the knothole earlier. It would have saved me a lot of hassle:


Will: 1, Scalpers: 0


Top image source.

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