Blue Devil basketball tickets are a hot commodity: There are far more fans than seats. And so some students enter a ticket lottery.
After one of these lotteries, Duke researchers posing as ticket scalpers found that students who lost the raffle were willing to pay $170 for a seat, while students who won tickets would only sell their seats for an average of $2,400.
This shucks common economic theory: the same seat for the same game should have a set price. Why would students on either side of the admittance fence place widely differing values on the same good?
Blame it on psychology, specifically the endowment effect (what we have is worth more than what we don’t). Also, to accept their inability to attend the game, students who lost the raffle had to devalue the importance of attendance: they convince themselves, “It’s OK, I didn’t really want to go, anyway.” While winning students’ astronomical price tag was a form of gloating: “Ha, ha, look what I’ve got and look how much it’s worth!”
This is why economists hate psychology (not so with behavioral economists, but that’s another story). And it’s this disconnect between economics and psychology that makes for a sticky secondary market: When psychology swings against demand, items sit on shelves. And when psychology hypes demand, scalpers, speculators, and eBay resellers prosper.
The secondary market’s even more exciting when an item’s intentionally underpriced. This is what happens when you start an eBay auction at $1.00. And it’s what Bruce Springsteen inadvertently did during his 2009 tour when he set prices for his New Jersey Meadowlands tickets at $95, thereby chucking StubHub and other scalping sites a bone of gargantuan proportions.
