At the Freakonomics blog, Steven Leavitt picks up on a May 21, 2006, USA Today story headlined Ticketmaster Uses Auctions to Fight Online Scalpers.
The story is reported like it is news, but USA Today has been “scooped” on Ticketmaster auctions by about, oh, two and a half years: on September 1, 2003, the New York Times reported Ticketmaster Auction Will Let Highest Bidder Set Concert Prices.
The main difference between the stories seems to be that, in the older article the “other guy” was Ebay, while in the newer article the “other guys” are StubHub and RazorGator. This is a difference that I find interesting. In the heavily networked world of online commerce, I thought first movers were supposed to be big favorites. In any case, shouldn’t we see one market emerge, not two? But here we have Ticketmaster, no stranger to stitching together various interests and putting itself at the indispensable center of things, fighting alongside EBay against a couple of ticket market upstarts. (Not to mention related services like Ticket Reserve and YooKnew.) What’s going on?
Clearly the auction format lets Ticketmaster more effectively price discriminate and gives them overall better information on ticket demand. The Times quotes economist Alan B. Krueger as predicting that “once auctions begin revealing a ticket’s market value, prices as a whole will climb faster.” Well sure, up front you’re going to get your high rollers, bestselling authors, and other hot shots, and they are going to pay much more. But I am more interested in prices in the cheap seats than in “prices as a whole.” Will the ability to extract more revenue from the big spenders raise or lower prices farther from the action?