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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.
You can't price graphics cards dynamically because OEMs and third party manufacturers would be completely screwed. Nobody would be able to produce cards except the company that designed them.
Interestingly, that's what nVidia's been doing for the last few years. EVGA is no longer working with them mainly for that reason, and every other company still making GPUs with them doesn't make most of their money on those products to begin with.
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You mean like Alienware not being able to sell prebuilt gaming PCs if Nvidia goes dynamic? Or AIB partners like Asus/MSI/EVGA?
For one, this can be sidestepped if the prerelease period where cards are dynamically priced are targeted toward only the DIY crowd. But even during general release, I don't see why OEMs and AIBs can't dynamically price too, at least online. It's probably trivial to have Nvidia set up an API that publishes its prices in real time so OEMs can do a simple cost-plus. Retail is more difficult, but dynamic pricing is being deployed in physical locations too with digital price tags that can change many times a day.
I'd also argue the entire ecosystem will benefit from disruption. Some players will suffer if they cannot adapt quickly, but that should leave more profit for those that can innovate away the inefficiencies around secondary markets. A physical store that resists change might not be all that different from car dealers that lobby against allowing consumers to buy directly from manufacturers.
Plenty have been impossible or "not how it works", until they're forced to adapt by innovation. I'm sure travel agents everywhere argued the same at the advent of the Expedias of the world. Same for cab companies when Ubers came out--no way drivers and riders would accept unpredictable prices! You can only operate on a fixed rate from downtown to the airport or a flat fee plus fixed price per mile and minute!
I don't mean to be flippant toward you, but my response would be... so?
Tesla and its sincere imitators push hard to skip dealers, and as far as I can tell, consumers generally like that. Let dealerships fail, particularly those in states protected by law from competition.
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