As Taylor Swift’s Eras Tour continues to dominate headlines and strain ticketing systems worldwide, the landscape of ticket reselling has never been more dynamic. Reselling websites offer fans instant access to coveted seats and an easy way to resell their tickets. Now new research sheds light on how the secondary ticket market has evolved — and why it matters to more than just Swifties.
The ticket reselling industry has changed dramatically in recent years, shifting from a shady practice to a mainstream, technology-driven industry.
Darden professor Pnina Feldman’s research focuses on how digital technologies affects operations strategy with emphasis on services, platforms, pricing, and consumer engagement.
Pnina Feldman, the Bigelow Research Associate Professor and a tenured associate professor at the University of Virginia’s Darden School of Business, has been studying this evolution and its implications for consumers and businesses.
In the past, the word “scalper” conjured images of suspicious figures lurking outside venues, hawking questionable tickets at inflated prices. Today, reselling or buying tickets is just a few clicks away on popular platforms such as Ticketmaster, StubHub, SeatGeek and VividSeats.
This shift raised an important question: Why was ticket reselling once seen as a scourge but is now widely accepted?
Feldman, who teaches in the technology, operations & management area, explores this question in a new working paper. Her research examines the impact of consumer behavior on pricing and operational decisions, with applications in retail, services and platforms, and related policy implications.
The Darden Report spoke with Feldman about her research on the evolution of ticket reselling. An edited version of the conversation follows.
Q: What does it say when the practice of ticket reselling hardly raises an eyebrow when it comes to tickets for Taylor Swift, one of the most popular artists of all time?
A: What it says is that ticket reselling has become so pervasive that both customers and artists have gotten used to this practice. What we show in our research is that these days reselling is not only commonly used, as in a “necessary evil”, but it is a good practice that benefits everyone involved – sellers and consumers.
Q: What is the genesis of your latest working paper on ticket exchanges and other reselling markets?
A: I started my research by looking at what sellers can do when buyers change their minds after a purchase — what we call recourse strategies. You know how it goes — you buy a ticket or a piece of clothing, and then regret the purchase. What can you do? We identified two common strategies:
- Refunds: This is when you return what you bought to the seller and get some money back. Say you buy a ticket to a concert or sporting event but then can’t go. You return it to the seller, and they might refund part of what you paid.
- Reselling: This is when you sell what you bought to someone else. Let’s say you bought a ticket but now can’t use it. You might be able to sell it to another person and get back some of the money you spent.
The questions we were interested in answering were: What is the optimal selling mechanism? Are all these recourse strategies the same? Why would a firm use one versus another? Is it better to simply say, “You bought it and regret it — tough luck, sorry you’re stuck with it?”
It turns out the best strategy is to allow reselling. It’s way better than not allowing any recourse, and it’s even better than the frequently used refund policy.
Q: Why does reselling work so well?
A: All recourse strategies aim to improve the chance that units, such as tickets, go to the people who value them the most. However, different strategies do this in different ways, and some are less efficient than others. For example, a refund policy requires the seller to set a price for buying back tickets before knowing how much demand there will be. This can lead to mistakes, like taking a ticket from someone who values it highly and then selling it to someone who values it less. Allowing people to resell tickets turns out to be the best way to ensure that customers who value tickets the most end up with them. If implemented correctly, this approach benefits both the seller and the buyers, as it increases overall satisfaction and profitability.
Q: If reselling is so beneficial, why did sellers object to it in the past?
A: The key lies not just in allowing reselling, but in how it’s implemented. Allowing unauthorized reselling, where the seller loses control over the reselling market and buyers and resellers transact freely, can be detrimental to sellers.
Reselling works incredibly well, however, if sellers can control the reselling market by charging a transaction fee for every sale. This allows the seller greater control of the market, limits the number of transactions — which keeps prices high — and enables the seller to effectively price discriminate between consumers who buy a ticket and keep it and those who end up reselling the ticket.
The emergence of modern technology, via electronic tickets and online platforms like Stubhub and Ticketmaster, allows sellers to effectively control the market, transforming reselling from a potential liability into an optimal strategy.
Q: What are the main takeaways from your research?
A: There has been a lot of debate about reselling, with two main areas of concern: First, there’s the question of how reselling affects sellers’ profitability. This led to some very vocal objections from artists. While this used to be a valid worry when reselling markets weren’t authorized, it’s not an issue anymore. In fact, today’s technology makes reselling the best strategy for sellers.
The second big concern is speculators. These are people who buy up tickets or other items early, hoping to sell them later at a higher price. Some see this as lost revenue for the firm, while others think it’s unethical. We argue that speculators can only swoop in when markets are inefficient, such as with rigid prices or high transaction costs. In a smooth-running market, speculators won’t be able to make a profit, so there’s no need to fear them.
Of course, markets are never fully efficient. But as technology keeps improving, markets should become more efficient. And that means we’ll likely see less speculation in the future.
Q: How does this apply beyond concert or sports tickets?
A: Resale markets can work in many industries that sell time-sensitive products, especially when customers’ needs change, and they may regret the initial purchase. Think airline flights, hotel rooms and cruises. While these industries often offer partial refunds, they could benefit from embracing authorized reselling.
Q: Good news for buyers and sellers.
A: Yes, very good news indeed! Technology has changed reselling in two ways. First, better allocation: It allows tickets to be redistributed more efficiently, benefitting sellers and buyers. Second, there is less fear of fraud: Transferring tickets is as seamless as booking an Uber ride.
Did you know Darden students learn about firm valuation technique through a case study of Taylor Swift’s masters? Read about the case here.
