Price Discrimination: Why Securing Concert Tickets is Harder Than Ever

This weekend marked the second failed attempt to secure live concert tickets in the past month. The first was Oasis in the UK and the most recent was Coldplay in India. In the blink of an eye, two dreams were shattered. But instead of ranting about it conventionally, I thought why not channel it into a blog post to resonate with the common misery? So, in true economist fashion, I am diving into the economics of concerts, particularly the concept of price discrimination in the live entertainment industry.

Price discrimination involves charging different prices for the same good or service, often legally and strategically. In the context of concerts, tickets are sold at varying prices depending on the quality of the seat. The closer or more visible the performance, the higher the price. This principle is based on the consumer like me knowing our willingness to pay, making way for those who are willing to spend more. The obvious question does arise as to do the price-setters (promoters of Coldplay/Oasis) know how much their fans are willing to pay. The answer is yes, to an extent. These ticket sellers can gauge their popularity and since there are no alternatives to these bands in the eyes of the fanbase, the market doesn’t function normally. As a result, there is no threat of undercutting the price.

Dynamic Pricing: A Price Tag That Won’t Sit Still

Take Coldplay for instance, even though I was not willing to pay for the higher-end seats, I missed out due to sheer competition and the fixed capacity of the venue. However, in the case of Oasis, I was not able to secure tickets due to the frustrating market forces at play or as it is commonly termed dynamic pricing. This system adjusted prices in real-time to take demand into account. I waited in the online queue for hours, expecting to pay 150 pounds, only to find that the tickets had risen to 400 as I reached the front. As a rational consumer bound by budget constraints, I had no choice but to pass on the tickets, no matter how much I wanted them. Yet, the concert still sold out and many fans complained about not even reaching the front of the queue. This highlighted that while certain consumers were willing to pay the higher prices, others were left empty-handed.

The key difference between the two events was the mechanism through which the tickets were sold and the subsequent economic dynamics. For both, buyers were required to enter an online queue at the time of ticket release. However, the prices of the Coldplay tickets remained fixed for those making it to the front of the queue. Interestingly, they even tried to make it more accessible by introducing more shows; or was it a tactic to create artificial scarcity all along? Either way, as the probability of acquiring any category of tickets remained the same, creating a level playing field between consumers from different income backgrounds. For Oasis, the dynamic prices fluctuated through an algorithm that is argued to be uncompetitive; only those lucky enough to reach the front and with adequate purchasing power were able to procure tickets.

Economic theory could argue that the dynamic pricing system in the grand scheme of things, is efficient as it increases profits even though consumer sentiments are harmed. Though, it is less equitable. In this conquest for the balance of efficiency and equity, does a dynamic or fixed pricing mechanism come out ahead? It is important to consider that

Music is not made by the rational economic individual fantasised by market theorists

Secondary Market: Where Prices Get Even Higher

While dynamic pricing can be vexing, secondary markets take things to a whole other level. In both scenarios, a fraction of the consumers who made it to the front of the queue are now reselling their tickets with a value 10-20 times the buying price, adding another cherry of price discrimination to the cake that is the concert. This also introduces an ethical argument where the seller purchases the ticket just to resell and maximise their profit without considering the interests of the ‘real fan’. To these resellers, live events resemble a financial transaction rather than amounting to any form of cultural value. While the real fan is unable to afford the ticket and has to abandon their hopes of attending.

Looking beyond the moral lens, these concert tickets are beginning to echo similarities to an asset such as gold or even real estate. However, it is easier to sell and remains outside the domain of taxation. Could this be another vehicle for wealth inequality? Is it the time for the government to intervene in not only the secondary market but in the primary markets as well?

While I am not entirely sure what government regulation in this space would look like; what I do know is that it is time we start viewing live entertainment from more than just a financial transaction. After all, concert experiences hold deep meaning for fans and communities alike. Who better than an economist to quantify the cultural value of these events or the intangible?