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Why does much of the public feel strongly entitled to below-market pricing for certain luxury goods and services? And on the flip side, why do some companies seem to intentionally yield profit to scalpers? Why not dynamically price every premium product/service in today's day and age?
Case study A: Taylor Swift is making the news for selling record amounts of tickets for her upcoming tour. The internet in response has been raging against Live Nation's monopoly, corporate greed, price gouging, bots, scalpers, and Citizens United over both the expensiveness and the lack of availability of her tickets. The brouhaha predates TS--over the past few months, it seems like every time a popular musician launches a tour, the same headlines resurface about greed, price gouging etc.
Case study B: Nvidia's 4000 series graphics cards have been catching flak for their pricing. Same talking points as above, minus the monopoly part because there is real competition in graphics cards.
All this seems silly to me:
Concert tickets, like most everything else, and especially like luxury goods and services, are fundamentally priced by supply and demand. The internet is livid that TS tickets are both expensive and then resold for even more, and directs its anger at TS, LN, and scalpers, arguing that real fans are being cheated somehow. But I don't understand how any of it is actually unfair. Is a concert goer a fake fan if s/he buys from the secondary market at a higher price rather than waiting in 8-hour-long virtual queues the moment tickets go on sale? Super Bowl tickets routinely sell for thousands or tens of thousands. Are your average working class fans being cheated somehow because they cannot afford that? And if the NFL set up a buggy virtual queuing system that allowed people who otherwise cannot afford it buy Super Bowl tickets at a hefty discount (maybe that's exactly how it works. Idk--I've never once thought of trying to buy SB tickets), should society be critical if they then turn around and resell said underpriced tickets for a profit, and then presume to spend the money on goods and services that deliver them more utility? It's not like there is anything particularly virtuous about making sure people who buy tickets to a ball game are committed to attending rather than being free to change their minds or profit from gross pricing inefficiencies.
Nvidia's 3000 series ran into extensive problems with extremely mismatched supply and demand for something like two years, and this of course led to plentiful scalping, which if nothing else is a huge waste of resources considering all the time and money spent on shuffling products to and from middlemen. For the 4000 series, Nvidia smartly priced its products substantially higher than before, which should reduce the mismatch and get inventory to people who want it the most. They can then cut prices and offer discounts once sales slow down in the coming months/years.
Live concerts and premium graphics cards are luxury goods and services. The songs themselves remain extremely affordable through streaming services, and graphics cards released 5 years ago can handle the vast majority of games so long as you do not insist on playing on max settings. It's hard for me to see anyone's rights are deprived because their desire to go to a live concert or play games at the highest settings cannot be met. All the outrage that that either TS or LN is price gouging just sounds so stupid--it's a concert, people. If you don't like the price, don't go. We're not talking about overcharging for gasoline prices when a hurricane is about to hit.
But ultimately, the above is all noise to me. The simplest solution seems to be just to price all luxury goods and services dynamically. Consumers understand that airline and hotel prices are heavily dependent on supply and demand--traveling the Wednesday before Thanksgiving will cost far more than the Wednesday a week later, and flying first will cost substantially more than economy. Hotels on weekends when large conferences are in town will be priced significantly more than otherwise, and suites cost more than standard rooms. There is no scalping that happens for either product because, aside from the TSA, tickets are priced using algorithms that adjust automatically so there is no need to scalp.
So why not do that? Why not dynamically price every luxury good in high demand? Disney does it for its parks. I didn't look too closely into it, but it seems like maybe TS opted into dynamic price this time around, but clearly it's not dynamic enough if there are any scalpers who still make a profit. As for graphics cards, I think the world is better off if Nvidia prereleases the 4000 series online a few weeks ahead of public releases (since traditional retailers can't dynamically price as easily); and during that prerelease period, use algorithms to fully satisfy demand at the market clearing price. Like I mentioned, scalping is a waste of resources and productivity for all, so get rid of it. If Nvidia can retain the vast majority of profits and recapture waste from middlemen shipping and handling, that capital can be redeployed to R&D or paid back in dividends, which then can be invested in other productive enterprises.
I think one piece missing from your analysis which you need to factor in, is that scalpers distort the market through their actions. The very act of buying up tickets/GPUs/whatever means that there won't be enough to fulfill demand, which drives the price up. Even factoring that in, maybe the original sellers should charge more - but I think you need to account for that as well.
That said, the biggest problem people have with scalpers isn't some kind of desire for below market pricing. It's that scalpers are purely parasites. If Nvidia chooses to charge me $1000 for a graphics card, I can accept that they made it so they get to decide what they want to charge. I won't buy at that price, but I'm not mad. When a scalper buys up all the cards for $500 and then sells them for $1000, they are "solving" a problem of their own making. They are simply scum who want to profit off others without doing anything to deserve it. People would have just as much of a problem if you did this with literally any product, it isn't just luxury goods.
This is not really correct. Scalpers, by definition, have no interest in the goods they're scalping -- they don't want them. Their only objective is to arbitrage the price people are willing to pay and MSRP. If there wasn't demand for the products at the price the scalpers were asking then they wouldn't sell and they'd be forced to lower their prices. There is no scenario where scalpers are "distorting the market", they correct pricing errors and make the market more efficient.
But I don't value market efficiency. Market efficiency is only useful as a means to an end. If nvidia were to charge more, they could at least use that money to make more graphics cards. When a scalper does it, they just increase the price for the consumer. They're worse than the people who drive into disaster areas and sell bottles of water for $50; even if it would be better for the disaster victims to get water for cheaper or free, they're at least generating some value by shipping it in and distributing it. Graphics card scalpers just generate value for themselves while lowering value for actual consumers and being net neutral for producers. As @SubstantialFrivolity says, they're parasites, unhelpful to anyone but themselves.
Yes, I'm in complete agreement with you there. The existence of scalpers is a strong signal that the original price was too low and I'd much prefer the counterfactual world where Nvidia raised its own prices 30-50%, generating more profits (thus delivering more value to shareholders). I can't blame scalpers, though -- their actions are not wrong any more than picking up a $20 bill from the sidewalk is wrong -- it's Nvidia's pricing error that they're taking advantage of, so it's Nvidia's fault. Personally I find the people complaining about Nvidia's higher prices to be more infuriating than scalpers. As you say, at least when Nvidia charges more, that value is going to R&D, manufacturing, stakeholders, etc.
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