Primary-Market Auctions for Event Tickets: Eliminating the Rents of “Bob the Broker”?

Coauthors: Aditya Bhave
American Economic Journal: Microeconomics, (2023): 15, No. 1, 142-170. [PDF]

Abstract

Economists have long been puzzled by event-ticket underpricing: underpricing both reduces revenue and encourages socially wasteful rent-seeking by ticket brokers. This paper studies the introduction of auctions into this market by Ticketmaster. We first show theoretically that Ticketmaster’s auction design, a novel variant of position auctions, has attractive efficiency, revenue and no-arbitrage properties. Then, by combining primary-market auction data from Ticketmaster with secondary-market resale value data from eBay, we show that the auctions “worked” in practice: on average, they eliminated the arbitrage profits associated with underpriced tickets. We conclude by discussing why, nevertheless, the auctions have failed to take off.