Paul L. Caron

Saturday, October 22, 2016

Greg Mankiw Happily Paid $2,500 For A Hamilton Ticket, But Asks: Why Should 80% Go To Resellers Rather Than Lin-Manuel Miranda?

Hamilton 3Continuing my obsession with interest in Hamilton (links below):  Sunday New York Times op-ed: I Paid $2,500 for a ‘Hamilton’ Ticket. I’m Happy About It., by N. Gregory Mankiw (Harvard):

You may have heard that “Hamilton” tickets are hard to come by. ... We, however, had no problem getting tickets. Two weeks before our trip, I logged into StubHub, the online ticket marketplace owned by eBay. I found the performance we wanted, located some great seats and within a few minutes was printing our tickets.

The rub is the price. Including StubHub’s fee, I paid $2,500 a ticket, about five times their face value. Such a large markup is not unusual.

Now, at this point, some people might object to this price. Terms like “scalping” and “price gouging” are pejoratives used to demonize those who resell tickets at whatever high prices the market will bear.

To be sure, most people can’t easily afford paying so much for a few hours of entertainment. That is indeed lamentable. The arts expand our horizons, and in a perfect world, everyone would have the opportunity to see a megahit like “Hamilton.”

Yet there is another way to view the situation. It was only because the price was so high that I was able to buy tickets at all on such short notice. If legal restrictions or moral sanctions had forced prices to remain close to face value, it is likely that no tickets would have been available by the time my family got around to planning its trip to the city.

High prices are a natural reflection of great demand and scant supply. In a free market, in which private individuals can engage in mutually advantageous gains from trade, they are inevitable until demand subsides or supply expands. ...

Although I don’t object to ticket resales above face value, and I think it is pernicious when others do, I was saddened by my “Hamilton” transaction in one important way. About 80 percent of what I paid went to the ticket reseller, rather than to Mr. Miranda and his investors.

In the past, Mr. Miranda has objected to the automated software that quickly buys as many tickets as it can, so they can be resold at a profit. But there is an easy way to put these resellers out of business: The theater can charge higher prices to begin with.

Such a move would surely increase the show’s profitability. From my standpoint as a theater consumer, that’s a good thing. Future talents like Mr. Miranda would find it easier to fund their innovative theater projects. And with more projects funded, those consumers who don’t buy “Hamilton” tickets — perhaps deterred by its uniquely high prices — would find a greater variety of other shows from which to choose.

Those who run Broadway theaters clearly feel some unease about charging so much. That is one reason they often hold a few tickets back and offer them cheaply in lotteries the day of the show.

Yet Mr. Miranda and his investors could find better ways to give back to the community than vastly underpricing most “Hamilton” tickets and enriching ticket resellers. Maybe fund scholarships for theater students. Or maybe fill more seats with high school students (which is already happening to some degree, thanks to a grant from the Rockefeller Foundation). I can’t imagine a better way to spark interest in the study of American history.

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"High prices are a natural reflection of great demand and scant supply. In a free market, in which private individuals can engage in mutually advantageous gains from trade, they are inevitable until demand subsides or supply expands." This is mythology. I challenge this well-know economist to specify and estimate a demand and supply equation system for his high-priced Hamilton tickets in which he demonstrates his textbook platitude, aka myth.

Posted by: Ednaldo Silva | Nov 10, 2016 2:29:18 PM

The Cabbage Patch Dolls and Tickle Me Elmo of 2016. What's the point in paying all that money if you cannot brag about it to the world?

Posted by: Skipp | Oct 25, 2016 10:13:33 AM

Hotels and airlines also sell perishable services. They use complex pricing schemes. Airlines use government ID check to prevent resale. Hotels require a credit card with a matching name. Theaters could do the same if they wanted to.

As to price, in other businesses the customer typically sees a better price far in advance and the highest prices close to the event date. Discounts are sometimes offered to seniors or groups. Customers don't love this system but it works pretty well for both sides.

Is the real challenge here that show producers want to be loved by their customers?

Posted by: AMTbuff | Oct 22, 2016 9:12:20 AM

I'm sure Hamilton is a fine play. But is it really 25 times better than the next best show? These are probably the same people who pay $10,000 to get their picture taken with a candidate when they could photoshop themselves in for nothing.

Posted by: mike livingston | Oct 22, 2016 3:22:14 AM