Every Sunday morning, when I jog past Suncorp Stadium in Brisbane, I notice a sign proclaiming that scalping (or on-selling) of tickets is prohibited.  In the future, there may be changes to laws around scalping across Australia, in response to an issues paper from the Commonwealth Consumer Affairs Advisory Council, which is currently out for comment (by 23 July):

Ticket scalping: Ticket on-selling and consumers

Most economists agree that ticket scalping is only profitable because event organisers aren’t charging high enough prices.  Because the price is too low, people demand many more tickets than there are actual tickets supplied.

So people compete with each other for tickets through lining up or waiting to snap up tickets as soon as they are available online.  The lucky ones who snap up the tickets end up paying an extra cost for the tickets (in terms of lost time), reducing the benefits they get from the under-priced tickets.  Many of these people may have been willing to pay a bit more to secure a ticket without having to line up.  Therefore it’s unclear that rules against on-selling make these people better off.

The unlucky ones, who aren’t so quick to snap up a ticket, will have to buy a ticket from scalpers, if they really want to go to the game or concert.  If a person buys a ticket off a scalper, then given it is a voluntary transaction, you have to assume that both the scalper and the purchaser are better off (otherwise they wouldn’t have transacted).  So we can’t say a ban on scalping makes sense from an economic point of view.

Regulation of scalping may be equitable, however.  It could allow a low-income family of diehard Broncos fans to attend a game every now and then, for example.  Achieving equitable outcomes can certainly be a legitimate objective of government policy, and, hence, regulation or prohibition of scalping may be justified on equity grounds.

The economics of ticket scalping are clear, however: scalping satisfies market demand and, hence, it is an efficient market outcome and should be allowed.  In regulating scalping, governments face the frequently seen tradeoff between economic efficiency and social equity.