AN ANALYSIS OF A CENTRALIZED EXCHANGE SYSTEM FOR THE TICKET SALES MARKET

What the paper says

We consider controlling ticket resale by introducing a centralized exchange (CE) system and explore the resultant impacts on the benefits to the event organizer as well as social welfare. The CE system allows customers who cannot attend the event to transfer their tickets directly to other customers at face value. We formulate a profit maximization model for an event ticket market where scalpers exist and the event organizer implements a CE system. The model also incorporates customers’ purchase-postponement behavior, which means that customers who may not be able to attend the event in the primary market will consider purchasing through the CE system. As a result, the following findings are presented. First, we show that the introduction of a CE system will increase the total demand in terms of customers purchasing in the primary market and the CE system. This is because the introduction of the CE system provides customers with an environment in which they can transfer at face value, so even customers with uncertain schedules can purchase tickets in the primary market. Second, in the special case where customers do not postpone their purchases and the willingness to pay for the ticket follows a standard uniform distribution, the introduction of CE increases price in the primary market. Although this is a negative factor from the perspective of consumer surplus, higher prices increase organizer’s profits, resulting in an increase in social welfare (i.e. the sum of consumer surplus and organizer’s profits). Moreover, numerical experiments reveal that the introduction of a CE system will lower the resale price and improve social welfare.