Concert economics: ticket price as a function of time

On my train journey from Leiden to Utrecht, I read an account of an economist’s ordeal in buying last minute concert tickets. It’s a fascinating tale of the way economists think and analyse scarcity and opportunity.

The price at anytime is determined by the information about supply and demand at that time. Without actual information, supply and demand is communicated through the perceptions of the price maker or his expectations.

There is never a truly sold out concert. There will always be incentives for ticket holders to sell. In this case, scalpers or touters get hold of extra tickets with the expectation that the concert will sell out and there will be people wanting to buy last minute tickets.

With plenty of time to transact, these touters ask for high prices.

The closer it gets to the concert, the more information is revealed, such as another source of tickets available for sale.

I often compare concert economics with that of airfares. Last minute airfares are expensive because airlines deliberately overbook. I tried it myself. [See The Myth of Last Minute Flights, Bon Journal, 2 January 2005] Ticket holders can’t exchange their tickets or sell back. As such, it’s rare they will cancel. As for concerts, people will cancel due to illness, new obligations, or other reasons. Concert reservations are rarely overbooked — instead, there is a waiting list.

I would love to see chamber music concerts sell out and witness the phenomenon described by the economist. More often times than not, concerts don’t sell out. Many concert producers don’t even use a pre-payment reservation system. Thus, nobody knows.


1 Comment

Filed under concert, economics

One response to “Concert economics: ticket price as a function of time

  1. Loved Levitt’s post about the father-daughter-scalper tale & thanks for sharing it. A while back I read Levitt’s & Dubner’s Freakonomics – it was a gift to me from someone who knows I enjoy this type of thing as I have a background in econ and often go around viewing human behavior through econ lenses : ) With respect to the tale, I do think there is the factor of “utility” in economics (a measure of what one values or what satisfies someone) and that this is what influenced the father’s final decision at the sight of his daughter.

    Regarding airline tickets, I read your other post and agree that last-minute is not a good idea when you have a particular plan (destination and/or dates) in mind. But I suppose it depends on how last minute you want be and how flexible your plans are…I have managed to find some deals online through hotwire but the only success I had at an airport recently when I was in shoes similar to the ones you describe in your post was when I had to get some place for an audition. I was lucky enough to be high up enough on the standby list to get on board (the airline in question explained to me that on certain routes usually if you are first or second on the standby list, your likelihood of getting on the flight is quite high because people get sick or miss a connections or can’t make the flight for some other reason). But believe you me, the waiting and uncertainty was most frustrating and I would have much preferred to be on the original flight for which I had been booked.

    One thing your post brought to mind was this post by Seth Godin about folks buying their way onto the NYTimes Bestseller list… , the relevant point here being the creation of the APPEARANCE of high demand and the role it has generating interest. So, back to the issue of concert ticket demand, I think that formal reservation systems cost either time or money and unless it is a major chamber concert series, they might not want to dedicate time to that…so what to do? You write: “Concert reservations are rarely overbooked — instead, there is a waiting list.” So I guess that two things would need to happen: 1. people would need to be told at the time of ticket purchase that if they are not there by a certain time (allowing for lateness perhaps) that they will forfeit their seats) and 2. people on the waiting list could be told to come to the concert as it is likely that some people will not show and, if so, they can buy the seat at that time and be seated. I can think of some logistics & considerations that would need to be worked out to get all the incentives in place and haven’t the time here to address them, but just offering some thoughts and again perhaps you’ve already thought of these things.

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