I don’t really understand the outrage over scalpers. Isn’t this just normal market behavior? Is a retailer that buys things and sells them with a markup a scalper?
People seem to be willing to pay crazy prices for events.
There is a reason this doesn't work in general though.
If you bought up all the food, farmers would raise prices until either you couldn't afford to do that anymore or eventually there is a splurge of new farmers taking advantage of all your free money until you run out of money. It could maybe work in times of famine where the government introduces price controls or rationing; it does not work in normal times.
For black markets (which is essentially what scalping is) to work, there has to be some shortage of a good that is priced artificially low. It works with concerts because singers can only sing so much but they also don't want to make the concert so unaffordable that only millionaires can go. There are very few situations like that. In most industries you would just increase prices until supply equals demand.
This makes sense, but I'd contend it's all the more reason for outrage: not only are scalpers doing what they're doing anyways, but they're destroying the (totally legitimate and sympathetic!) reason for "artificially" lowering the price to begin with.
I should note that outrage doesn't seem to land on the people who buy from scalpers, which is...probably correct? Seems easier to say "don't break the contract" to scalpers instead of fans who are just able to pay more.
This is the reason that businesses don't try to monopolize the food industry. It's not competition as we just saw from the egg industry. The government gets pushed back from the masses pretty quickly on food related issues.
Yes, although i would argue that a cartel suppressing supply is a different mechanism than what is happening with scalpers.
The onion futures thing is kind of interesting, because it was essentially the opposite of a scalper - they didn't try and buy all the onions to make price go up, they did it to crash the price of onions so that their short positions would pay off. Still a fair counter example to the idea that the market would self correct by itself.
People not trying to monopolize the food industry is a bit of an american centric view, e.g. Canada had a government mandated wheat monopsony for a long time. I think australia had something similar. I'm sure there are plenty of historical food monopolies. They of course couldn't be too greedy or its off with their head.
>This is the reason that businesses don't try to monopolize the food industry. It's not competition as we just saw from the egg industry. The government gets pushed back from the masses pretty quickly on food related issues.
But you provided your own counterexample with eggs?
Note they didn't monopolize it, so I guess that was correct. They did form a cartel that did cause a lot of political issues, and if we had a functioning government would have been a very risky bet.
Like the logic here is the scalper company buys all the crops and then resells at an exorbitant mark up because everyone needs to eat, but then the market price becomes what the scalper is selling for. Would the farmer really leave that much on the table? They may be willing to give some discount to sell all at once, but there comes a point where it is no longer worth it to them to do so. The whole scalping thing only works if you can buy low sell high, but if you sell high the people you are buying from will start to notice that they too can sell higher to other people.
Concerts are different because there are brand reasons to keep prices low. Farmers aren't a charity, they aren't going to sell significantly below market price just for the good vibes.
There is a case where farmers don't have the power to fight against big corporations. One example in US that I know of is roundup pesticide issue.
This makes me think that it is possible for corporations to suppress the price on the farmer side and fix it on the consumer side.
This happened to at least some crops in Turkey in the past, for example farmers were selling hazelnut for 15TRY/kg and you could only buy it for 100TRY/kg in big cities. Farmers were actually complaining that they couldn't even make a profit from growing hazelnut.
Corporations would like to do this with even water if given the chance as Nestle CEO was saying himself in a famous video.
So they would for example do it with bread and starve people in the process if it means they can make money. And I think that they could easily do this for example in US if they didn't correctly fear that people would force the goverment to smash them.
Also the selling format doesn't have to be the crop itself. For example they make nutella from hazelnut. So farmers can't associate it directly with their selling price even though it is obvious that they are getting shafted.
Another possibility is the farmer selling 80% to the corporation for the normal price and then selling the rest at a massive markup so both profit. Same thing that is happening with ram manufacturers. Then the whole thing is justified as free market and only the consumers get hurt because in the end you have to buy RAM. Or equally the corporation could pay the farmer a 20% bonus and still make 80% extra profit on end consumer. Farmer might not object if the scheme is dependant on the corporation.
It's not a simple buy/sell marketplace. There's no recourse for fans who purchase a confirmed ticket, only to find that the seller "doesn't have them" and see the same ticket relisted for higher if the price jumps. Stubhub prioritize these scalper relationships and doesn't meaningfully protect its buyers from getting screwed over.
The ultimate customers would certainly pay more than the face price which is what the scalpers pay, yet the scalpers get all the tickets. This is abnormal market behaviour.
An auction would be the obvious solution, and I guess you could argue it effectively is an auction, just with initial sales that pretend to be a race and are actually sold to speculators who then run the auction.
If reselling is allowed a market is created, pushing up prices. But that extra money doesn't go towards anyone involved in the creation of the product! It goes towards scalpers. Though there's a bit of price discovery value....
Without reselling scalpers have no reason to scoop up the tickets.
So if you prevent reselling... then concertgoers just have to do a lottery or something for the scarce resource and people who aren't interested in the concert have no reason to buy the tickets! Just a better experience for everyone except for the scalpers and I guess Taylor Swift cuz she won't know the price ceiling for tickets.
I suspect we'd see management companies trying out auctions and upgrade bidding not long after a resale prohibition passed. Or they'd reinvent the fare class system airlines use.
You are describing rent-seeking behavior: middle men who add no economic value yet inject themselves into transactions.
Yes, this is “normal” in the sense that it is common. It is “normal” in the same way that cancer is “normal”.
No, this is not “normal” in the sense of being behavior the government should just tolerate. It is in the same category of market failures as monopolies and externalities.
You are mixing things up. Just pricing your product based on demand does not necessarily make you a scalper. It's the fact that you are not the producer of the good itself that makes you one.
To use the real estate example, there is a difference between a developer selling a house it built, and an investor selling a house that he bought when it was cheaper.
I think that if you poke at the term "rent-seeking" with the definition of "middle men who add no economic value yet inject themselves into transactions", you'll just end up arguing about what "adding economic value" means.
That said...if you can do that, you'll probably find that some additions of economic value are far more defensible than others, so it shouldn't all be flattened in the manner you're suggesting.
I mean, scalpers add economic value, right?! They allow (wealthier) people who didn't stand in line at the right time to have a chance to purchase a ticket!
Yeah. “Rent-seeking” is just a fancy rhetorical term for “people doing things I don’t like with money”.
Subscriptions are rent-seeking. Loans are rent-seeking. Spending millions in capital to buy a building and renting apartments for thousands? Rent-seeking. Copyright and patents, for sure, unless an AI company is involved in which case copyright is noble and must last a thousand years, because AI companies are rent-seeking.
No, too reductive. Rent-seeking is when people manipulate a situation to charge money without providing value themselves. Landlords are rent-seekers to the extent that they don’t do much, they mostly just own property - typical rent is many, many times the value of someone looking after the maintenance and building insurance for you (and anything else you want to argue a landlord does). The housing supply is naturally quite limited so the market doesn’t self-correct.
And anyway, if enough people don’t like the things people are doing with money, we can stop them from happening! So a pretty odd gotcha, to me.
I mean, you saying that landlords don't do much is the exactly what I meant when I said "arguing about what 'adding economic value' means"
>typical rent is many, many times the value of someone looking after the maintenance and building insurance for you
I'm curious about this.
I'm not sure if there's a universal rule of thumb, but it's something like "expect 1-4% of the home's value in maintenance every year" - $4,000 to $16,000 on a $400,000 home. Take the lowest end of that - $333/month in expected maintenance a year. Add $100/month for home insurance.
You're claiming "many, many times" $433 a month in that scenario? Given more recent interest rates and the uptick in "maybe you should rent for awhile, actually" articles/videos I've seen, this doesn't strike me as plausible...
Not sure what the intent behind this reply is but - I guess it's strictly true and I think we're agreeing in some sense, but to be clear I think it is totally fine to say that scalpers are doing things I don't like with money, and I'd like to see their excesses curbed.
The outrage is over the apparent collusion between a platform that argues it only facilitates a fan-to-fan marketplace, and a hedge fund run by the platform's CEO that sells a massive volume of resale tickets. This is definitely not on the spirit of competition regardless of it's illegal or not
Yes it's rational market behavior. But it bothers people for such a blatantly worthless middleman to capture all consumer surplus for themselves while providing zero value.
If you bought all of the food then offered the food at 10x the prices, we'd be outraged with you, yes.
Stakes are lower because it's a luxury good, not food, but it's the same idea.