June 12, 2017


Broadway Tickets, for the Price of an Economics Lesson (JAMES B. STEWART, JUNE 8, 2017, NY Times)

"At the most basic level, all pricing is about allocating scarce resources," said Robert Phillips, the head of marketplace optimization sciences at Uber, the car service that has pioneered surge pricing in local transportation. Surge pricing is another form of dynamic pricing. (Mr. Phillips previously headed Columbia University's Center for Pricing and Revenue Management.)

"I've worked in theater, concerts and sports," he said, "and they all have a similar problem: For extreme hits, demand at what people would consider a reasonable price far exceeds supply."

From an economics perspective, "this is simply a rationing problem," he added. "If you keep prices low, people will buy tickets and resell them on the secondary market. Someone is going to pay a market-clearing price, no matter how high. The only question is who should get the money: the investors and performers and creators, or a speculator who managed to snap up the tickets the moment the box office opened?" [...]

The Harvard economist N. Gregory Mankiw paid $2,500 apiece last fall for prime tickets to "Hamilton," which he bought two weeks before the performance via StubHub. As he put it in a subsequent column in The Times, "In a perfect world, everyone would have the opportunity to see a megahit like 'Hamilton.'"

But "it was only because the price was so high that I was able to buy tickets at all on such short notice," he added. "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." [...]

[A]s I discovered, it helps to be flexible. While I started out this week looking for "Hello, Dolly!" tickets, I ended up at "Groundhog Day," a new show with seven Tony nominations, including best musical and best actor, for a small fraction of the price of seeing Bette Midler. Seats for "Groundhog Day" were available at TKTS for half-price and online for $50. (And I loved it.)

Dynamic pricing and super-premium prices may be relatively new, but the scarcity of tickets for hit shows has a long tradition. Mr. Schumacher cited "My Fair Lady," the "Hamilton" of the 1955-56 Broadway season. As Broadway lore has it, a man in the audience turned to his neighbor, an older woman, and asked why the fifth-row center seat next to her was empty.

"My husband died," she replied.

"Didn't anyone else want to come?" he asked.

"No," she answered. "They're all at the funeral."

Posted by at June 12, 2017 7:33 AM


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