Thursday 7 March 2019

Markets for lemons and ticket scalping

The past week's hooplah over ticket scalping missed what I think's the most fun problem in the whole mess.

How do you, as a third party, run a resale market for event tickets that are issued digitally by another agency that wants to see you fail?

There are real problems facing buyers. How can you tell that the ticket you purchase on Viagogo is authentic rather than fraudulent, and how can you tell that that same ticket has not previously been sold?

The problem is easy if you think about an integrated ticket issuer/reseller. The issuer can cancel the initial ticket if the person who initially bought it wants to sell it back to the issuer or to the issuer's reseller, then sell the new ticket.

In that setup, you don't have to worry about whether the person who sold the ticket to the reseller had previously sold a different digital copy of it to someone else. The ticket is cancelled, so any prior versions using that ticket's QR code would be void and simply wouldn't work if it showed up at the venue.

But a third-party on-seller cannot do that. And neither can anyone who bought a ticket and honestly wants to on-sell it once and once only. The sale then requires trust, because there is no way of verifying whether there were any prior sales. Even Viagogo can't do it because while it could check that it isn't selling multiple tickets for the same seat, it can't check whether that seat was previously or simultaneously sold on other platforms or privately.

So what's a solution?

One solution relies on the initial purchaser's reputation, and the buyer's reputation. If I buy a ticket for a concert and then offer that ticket on Twitter, from my real-name account, noting that I can't make the concert and that I'm taking offers - I know that I bought a legitimate ticket, and anyone buying from me knows that I would be publicly shamed if caught selling a ticket that didn't wind up working because it had been on-sold multiple times.

But that also makes me something of a hostage: if that buyer sells the ticket to someone else, whether once or repeatedly, then claims that the ticket didn't work - that buyer could attempt to extort me for a refund.

TradeMe has a lot of experience in making markets that work based on reputational feedback mechanisms, but they don't allow ticket on-sales on their platforms.

Another potential solution would have the payment held in escrow by a third-party platform pending verification that the ticket worked, but without the venue being willing to confirm whether a ticket worked, that too would have problems if a buyer went to the show then claimed to have been bilked.

And all the way through it, the initial ticket vendor absolutely does not want any of the secondary markets to work, in part because it would prefer to establish its own secondary market to be able to take some of the uplift in price for events it had initially underpriced relative to revealed demand.

Like I said - fun problem. Everybody's moralising about the rights and wrongs of buying something at a low price and selling it later at a high price (or losing your shirt because the venue had not underpriced the tickets relative to demand in the first place); it's far more fun to think about how these kinds of markets could work, and what happens when important players don't want them to work.

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