Economic Issues for Organizers and Buyers of the Tickets - Case Study Example

Glastonbury festival by Student’s name Code+ course name Professor’s name University name City, State Date Glastonbury festival is one of the greatest events that take place annually. The growth in popularity prompted the organizers to adopt new method of selling tickets without having to involve touts. The tickets were availed on competitive basis that triggered the increased demand of the commodity. The competitive nature of provision was such that the tickets were perhaps few and did not accommodate resale power by the buyers. This made the consumers/buyers to prioritize buying the tickets and forego some other opportunities that could arise in future in fear of lack of tickets. The attendants of the Glastonbury festival had foregone the following: i. The buyers foregone the possibility of any other better event that could coincide with the Glastonbury festival. The prohibition of ticket resale made the buyers to make final decision on acquisition of the tickets. ii. The fact that the festival was non refundable once on acquisition and resignation of attending the festival made the buyers to forego any leisure that could using the ticket money. Theory of demand and supply in the market assumes that the market is perfectly competitive in that there are many buyers and sellers in the market but none of them is able to influence the price instead the price is determined by forces of demand and supply. Under normal circumstances this may fail because the suppliers determine the price of their commodities. In the sale of the tickets the price of the commodity was not at market clearing level. The price of the tickets depicted to be very low as manifested by the increased demand in the market after the exhaustion of the product. The demand of the product was much high than the supplier could supply. But perhaps the price of tickets had little relatively influence in the number of tickets the buyers could. The demand might have increased because of the following: i. Expectations of shortage of the product in future. The provision of the tickets was on competitive basis. This triggered every buyer to compete to acquire the commodity because they were aware that within a short duration product supply would be stopped. Buyers could no longer consider any other factor that could arise in future instead they valued the situation at hand by then. ii. Consumer taste and preference. The festival was becoming so much preferred by many of the attendants. This set them on toes that on the mention of sale of the tickets the demand went very high keeping the price of the tickets constant. This market trend can be explained using the diagram of shift along the demand curve as shown below. Fig 1 The demand of tickets was initially at D1 but in long-run due to the above factors the demand increased to D2 as represented by the curves. This in return could result to the changes of the equilibrium points in the future. The equilibrium price will increase from P1 to P2 in response to forces of demand and supply theory of the market. Due to increased demand of the tickets the equilibrium quantity will also shift in future from Q1 to Q2 as shown in the diagram. ( Krugman & Wells, 2012 ,p. 327) The new method of restricting resale of tickets may provoke different perception among the buyers after the announcement of the events headline acts. In the long run if the buyers are not impressed by the events acts, the demand of the tickets will reduce due to lack trust on the headline acts even in future. On the other hand, if the consumers are impressed by the headline acts the demand will increase tremendously at constant price. This can be illustrated using the diagram below. Fig 2 Initially the demand was at D. Negative preference by consumers to the acts will cause the demand to reduce causing the demand curve from D to D2 as represented by movement above. Positive taste and preference by consumers to acts will in response cause an increase in demand thus shift in demand curve from D to D1 as represented by the movement above. In general, consumers’ preference has different effects on the tickets demand.(Besanko & Braeutigum ,2010 p.36) However there is more than enough reasons for campaigning for the ballot method over the newly method that is used by the event organizers. The introduction of the new method has brought many challenges among the buyers. The number of frustrated consumers has really increased. This is because there is no awareness by the buyers due to elimination of tickets touting. Tickets touting enhance the awareness on the availability of the tickets to the buyers. This ensures that the number of frustrated buyers arising due to lack of awareness is reduced. Resale of the tickets in the ballot method is also of much important to the scalpers. The tickets are mostly resold at relatively higher price. This acts as a business opportunity to the scalpers. Mostly the scalpers will wait until specific time especially the last days to event date. This helps them to maximize profits associated with demand and supply forces of the market. Introduction of the new method of tickets selling leads to closure of this opportunity thus this may lead to reduced popularity of the whole event. The appreciation of tickets brokers is also of great importance to the both the brokers themselves and the buyers at large. Brokers often operate out of the office and sometimes they use internet and call centers to operate their business. They have websites that offer interactions with their customers and consumers’ storefront to return to incase there is any problem with transaction. The extra services offered by the brokers such as hotel and airfare are of greater benefits to buyers. This increases buyers trust and confidence on the method of tickets acquisition. Generally, the buyers tends acquire resold tickets from well known scalpers and brokers thus they guaranteed on the validity of the tickets. On the hand the newly started method of registering for the ticket has various impacts on the allocate efficiency. The method has reduced long day queuing for the tickets that was formerly one of the greatest problem. Prior registration for the tickets allocation reduces the last minutes scramble for the tickets. It has also reduced arising exploitation of the consumers by brokers and scalpers who are out to make maximum profits from the resale of tickets. However the method has faced some disadvantages in its allocative efficiency. The acquisition of the ticket has nothing to do with buyers’ effort but instead it depends on the vagaries of the internet. This leaves number of consumers that have no access to internet not being able to acquire the tickets. This has led to increased number of frustrated consumers. The increased number of frustrated consumers is an implication of possible rise deadweight welfare loss. There is excess demand of the commodity than the suppliers are providing. This causes lack of demand and supply equilibrium. Under normal market forces, various factors influence the size of dead weight. They include price ceiling, price floors and taxes. The level of taxes are said to cause deadweight loss because they hider people from engaging in transaction they could have otherwise made because the final price of the commodity or the product at hand will be above the equilibrium price. Price ceilings also create deadweights losses by discouraging production and reducing the supply of goods to below what the consumers generally demands. This causes consumers to experience shortages and producers to earn less than they would actually earn. The diagram below summarizes the effect of price on deadweight loss on the market demand and supply. (Glaeser & Luttmer, 2003 p.1027-1030) Fig 3 Viagogo carried out research on the newly started method of ticket selling by the Glastonbury festival organizers. The idea was to criticize the scheme and set some of the weaknesses that the whole method faced. This was depicted by the comment that one of the viagogo spokesperson posted when a number of buyers came up to criticize the scheme. He generally set the idea of once a buyer has bought the ticket it belong to him/her and the decision of whether to resell the tickets should be left on owner of ticket. In such a case, if the unpopular headline acts are announced the buyer may not face the challenge of loosing since they can resell their tickets. The research results have some benefits in it but still continue to face some challenges. The process of reselling the tickets may encourage rise of conmen. Exploitation of buyers by the brokers and scalpers is also a factor that should be put into consideration while dealing viagogo research. (Thompson, 2014) In conclusion, the newly started scheme has various benefits that it brings to both the organizers and the buyers of the tickets at large. The advantages should though not be used to give 100% acceptance of the whole scheme. It still has various shortcomings that it poses to consumers. Reference List Krugman, P. and Wells, R (2012) Microeconomics, worth publishers. David A. Besanko and Ronald R. Braeutigam (2010) Microeconomics, John Wiley & Sons press. Glaeser, E. and Luttmer, E. (2003) The Misallocation of Housing Under Rent Control. American Economic Review. 93(4). American Economic Association publishers. Thompson, Miranda. (2014). Buying a festival ticket? Don't get scammed! Company. Retrieved on 22 December 2014 from http://www.company.co.uk/celebrity/festivals/festival-ticket-scammers-festival-ticket-scams Read More