Supply And … Supply?

One economist has a suggestion for box offices frustrated by tickets ending up on the secondary market for pennies on the dollar: Buy the tickets back.

Northwestern University economist Jeff Ely says the above situation isn’t only aggravating – to those who paid full price as well as to box offices with plenty of face-value seats left – but a lost opportunity.

“The fans who are going to buy from the scalper at the low price might also be willing to buy at box office prices,” Ely wrote on his Cheap Talk blog. “If you buy the cheap seats on StubHub first then the box office is the only option left for them. And if they do buy from the box office you have made a profit because you bought low and sold high.”

He clarifies that a box office shouldn’t buy tickets that are priced near or above face value, only those priced low enough to be worth the risk. Tickets could potentially be bought back and resold multiple times.

Sounds simple enough, and could especially come in handy for sporting events, perhaps for an underperforming team. But it might not be that easy.

Athena Makish, StubHub’s head of analytics, told Time’s business page that sellers wouldn’t list tickets online for so cheap if they could get more.

“If fans were willing to buy at box office prices, then sellers would price at such,” Makish said. “Sellers are smart – they create an efficient market in most cases.”

Also there’s the supply issue.

“How does the box office know that it has bought all of the supply?” Makish said. “It’s not possible and, as such, the box office would never really be able to price much higher than the price that exists on the secondary market (both online and on the street).”

Luckily for many concerts, as opposed to sporting events, the StubHub problem is that there aren’t enough tickets to meet demand and sellers can often make a profit.