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Culture War Roundup for the week of November 14, 2022

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Scalping is only profitable when you can buy something that's artificially underpriced and sell it for what buyers actually are willing to pay.

This makes it sound like scalpers are doing a service and keeping people from foolishly spending less money, as if a buyer is going to say "oh man, I'm glad I bought [thing] for $200 instead of $100!"

I think, in practice, scalping is more "guy buys 50%+ of the stock of [thing], forcing people to buy it from him because it's sold out because the guy bought 50%+ of [thing]." You can raise the prices on something, but so long as it is sufficiently scarce, it probably won't stop someone from thinking they can flip it for better. (See also: gun and ammo prices during the pandemic)

Your dynamic pricing idea also doesn't seem to account for botting--what happens when the price dips to a good low point, and then is immediately hammered for north of, say, 10% of all tickets?

Math is entirely correct (and this is just econ 101), but put very simply and less precisely - if the original market is well behaved enough, and there's "enough" thing for everyone who's willing to pay $100, then the scalpers can't make money, because people can buy from the original seller at $100. And the people who haven't bought tickets are willing to pay less than $100, so the people the scalper crowds out by buying extra tickets are 'on the margin' and willing to pay $100, so the scalper doesn't make money - they buy for $100, sell for $100. But in cases of 'scalping' there usually isn't enough thing for everyone who's willing to pay $100, so there are lots of people who are willing to pay $200 who aren't getting a ticket, so the scalper buys for $100 and sells for $200.

This 'makes the market more efficient' in cases where the thing matters and isn't a concert ticket - if company A wants to buy thing for $10k because it's a critical component for centrifuge and company B wants to buy the thing for $5 because it looks nice on their wall, and the seller is selling for $5, and B buys it, this is just dumb - whereas if the scalper scalps it and sells it for $10k, the economically useful thing happens, and the scalper gets the monetary benefit (which the original seller can capture by raising the price themselves).

There are a finite amount of product/service. There are more people who want product/service than exist. Someone is getting screwed no matter what, the only question is who.

With dynamic pricing, the product is distributed according to some combination of desire and wealth. If we have 5000 things all sold to the highest bidder, then the 5000 people who are willing to pay the most get it. If you really really really want it, or have lots of money and resources of your own to exchange for it, then you get it. While people who only slightly want it don't get it. Importantly, this is decentralized: people can decide on their own the maximum amount they are willing to pay. In some sense, casual customers who only want it badly enough to pay $100 losing out to obsessives who are willing to pay $300 is a good thing, because the obsessives actually want the product more. Also importantly, there is no deadweight loss. The extra price goes directly to the seller, and via market forces will incentivize them or competitors to produce more comparable goods/services (if all GPUS cost double, then existing manufacturers can afford to scale up production, and investors will fund more competitors)

With fixed pricing and no scalpers, the product is distributed on a first come first serve basis. The first 5000 people who get there get the product. Now, this does nonrandomly favor customers with a higher valuation on the product who will be more likely to obsessively stand in lines or wait for product release, but in a much weaker way. It rewards people with more free time on their hand instead of people with more money. It's much more "fair" in the sense that rich people don't have an advantage over poorer people, but much worse at assigning product to people who actually want it more, as some people may not have the same time flexibility as others. And, importantly, this extra time spent is pure deadweight loss. A person standing in line for 48 hours doesn't benefit the seller whatsoever, it's just 48 hours of time lost in order to change their order. The supply/demand feedback breaks down and fails to send the proper signals to the producer that they need to produce more of the good.

Scalpers provide the "service" of effectively changing the second system into the first one, which is more market stable. People who value the product at a very high level but failed to get lucky with the timing would be screwed in the second system when someone else buys their product. But if they pay a scalper then they can get their slot as if it were in the first system. And, since they value the product more highly than the average customer who would buy the product at the low price, value is created, because products are distributed to people who want them more.

Now, scalpers can also rentseek by creating artificial scarcity (if there are 10,000 seats at a concert and only 5,000 willing customers, then allocation wouldn't normally be an issue, but a scalper who buys 9000 tickets creates scarcity). But for anything that would have sold out anyway this is not a concern. The only real concern is that they're sapping the profit that by all rights ought to go to the producer and incentivize them to create more product. In some ways it's the worst of both worlds. But they are providing a service to high-value customers who want the product and wouldn't get it without them. And, importantly, dynamic pricing would provide that same service without the rent-seeking. The market is broken, scalpers are a symptom and not the disease.