Ticket Scalpers Are Hidden Heroes

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Dozens
of people among the throngs of jubilant fans hold crudely made cardboard
signs featuring the words "I Need Tickets." Strangely,
these people who, to an outsider, appear to be in desperate need
of tickets for the big game, hold numerous tickets high above their
head so everyone can see. These people are the noble ticket scalpers.

They are a
people scorned by athletic organizations, lawmakers, and many fans.
What are they doing to merit such ill will and legal persecution?
Are they truly unscrupulous, greedy parasites who dupe fans and
injure the athletic organizations?

The United
States does not have a federal prohibition on ticket scalping, but
many states and even more municipalities have restrictions or outright
prohibitions. This is very unfortunate for everyone attending events
in such areas because the ticket scalpers are real public servants.
The laws, to the degree that they are enforced, are actually responsible
for the majority of the unfavorable things attributed to the practice
of scalping.

Scalpers provide
a myriad of services and benefits to a surprisingly large, and seemingly
disconnected, group of individuals, businesses, and organizations.
Surely, they deserve praise rather than scorn and persecution.

One of the
first beneficiaries of the Scalper’s services are the athletic organizations
themselves. This may seem surprising, since many event organizers
go to great lengths to discourage fans from purchasing from scalpers.
Scalpers enable the teams to presell tickets much more effectively.
This is because scalpers are willing to purchase tickets in advance
in the hope of being able to hold them for some period, and then
resell them for a profit.

In contrast,
many people are unsure, at the time of presale, if they will be
able to take off from work or other obligations. This uncertainty
leads people to abstain from purchasing until they are certain they
will be able to attend. Thus, the ticket scalper enables the team
to get their money earlier through ticket presales.

Scalpers absorb
the time risk associated with events. They absorb the risk associated
with scheduling issues (i.e., whether or not fans can attend). They
also absorb the risk that unfavorable events could occur. Anyone
who has ever bought or sold a ticket knows that ticket resale values
drop dramatically after a team has a few losses on its record. If
the team does well, the scalper can make a nice profit; if the team
does poorly, he can suffer a huge loss.

This opportunity
for profit is good for fans because it ensures that tickets will
be made available should the team do unexpectedly well. It is good
for the team because it will be able to presell tickets even for
bad seasons. The more the local law enforcement cracks down on scalpers,
the greater the reduction in these positive externalities.

Season-ticket
holders are also indebted to scalpers. Though the season-ticket
holders have chosen to absorb the scheduling time risk, they are
more comfortable doing so with the expectation that, should something
unavoidable arise, they could sell their ticket to a scalper. Thus
the scalper provides a type of scheduling insurance. The scalper
is able to provide liquidity for season-ticket holders.

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the rest of the article

December
11, 2009

Briggs
Armstrong [send him mail]
is a student at Auburn University majoring in accounting and minoring
in finance.

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