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Primary-Market Auctions for Event Tickets: Eliminating the Rents of 'Bob the Broker'?

Aditya Bhave, Eric Budish

NBER Working Paper No. 23770
Issued in September 2017
NBER Program(s):The Industrial Organization Program

Economists have long been puzzled by event-ticket underpricing: underpricing both reduces revenue and encourages socially wasteful rent-seeking by ticket brokers. This paper studies the introduction of auctions into this market by Ticketmaster. We first show theoretically that Ticketmaster’s auction design, a novel variant of position auctions, has attractive efficiency, revenue and no-arbitrage properties. Then, by combining primary-market auction data from Ticketmaster with secondary-market resale value data from eBay, we show that the auctions “worked” in practice: on average, they eliminated the arbitrage profits associated with underpriced tickets. We conclude by discussing why, nevertheless, the auctions have failed to take off.

“It is nevertheless true that gangs of hardened ticket speculators exist and carry on their atrocious trade with perfect shamelessness.” —New York Times Editorial (1876).

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Document Object Identifier (DOI): 10.3386/w23770

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