Market Price

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  • #18613

    If it’s true that in a free market prices tend to the market clearing price, why is it then that in the relatively free market of ticket sales (concerts, sporting events, movie premiers, etc.) it is often true that ticket prices are often well below the market clearing price, as can be seen by the obvious “black market” that results (ticket scalpers who sell tickets for well above the face value of the ticket)?


    It isn’t safe to assume that vendors who sell tickets are uncontrolled by local governments. Concert halls, sports arenas, etc. are subsidized by governments and therefore, their policies are likely controlled. For an example of a somewhat hidden government control, consider anti-gouging laws that prevent gasoline stations from raising prices to clear markets in “emergencies.” The resulting excess demand isn’t a market generated result even though the man of the street might see it that way. The mere fact that it is illegal to resell a ticket at a price above face value is prima facie evidence, although not proof, that the government is controlling the pricing policy of the vendor.

    But even if vendors set their own pricing policies and price tickets below market-clearing to give charity to some of their customers or to create buzz for the event, the market still clears. Secondary markets arise and generate this result if it doesn’t occur in primary markets.

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