The Market Punishes Greed

From George Will’s column:

Studying the Internet site Stubhub, which is owned by eBay, Harrington monitored the secondary market in Ohio State University football tickets for the Oct. 25, 2008, game against Penn State that was attended by a stadium record crowd of 105,711. Stubhub acts as a broker, charging 15 percent from buyers and 10 percent from sellers, who can charge whatever they choose. Generally, a ticket’s value depends on the seat’s location — the lower in the stadium and the closer to the 50-yard line the better.
Harrington collected two sets of information, one on Oct. 13, 12 days before the game, the other on Oct. 21, four days before. On Oct. 13 there were 346 sellers offering 682 tickets. Eight days later, 411 sellers were offering 845 tickets. In the interval, Ohio State beat Michigan State and undefeated Penn State beat Michigan, intensifying fans’ interest in the game.
Yet the average price of the tickets offered declined from $359 to $304. This was partly because the quality (seat location) of the remaining tickets declined. Also the number of selling days was becoming smaller. Seats at entertainment events are, like airline seats, a perishable inventory: When the plane takes off, or the game begins, the value of an unsold ticket becomes zero.
A greedy seller — one who priced his tickets too high — was less likely than other sellers were to sell them two weeks before the game. Hence he had to resort to much deeper discounts than others did as game day, and the potential worthlessness of his assets, drew near. The larger the number of seats available in the secondary market, and the more transparent that market is, thanks to the Internet, the more likely it is that greed will be punished.

Posted by on May 16th, 2009 at 6:25 pm


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