Saturday, October 22, 2016

Harvard Professor Greg Mankiw Paid $2,500 For A Ticket To See "Hamilton" And That Is Good

See I Paid $2,500 for a ‘Hamilton’ Ticket. I’m Happy About It.  Excerpt:
"It was only because the price was so high that I was able to buy tickets at all on such short notice. If legal restrictions or moral sanctions had forced prices to remain close to face value, it is likely that no tickets would have been available by the time my family got around to planning its trip to the city.
High prices are a natural reflection of great demand and scant supply. In a free market, in which private individuals can engage in mutually advantageous gains from trade, they are inevitable until demand subsides or supply expands.

The comedian Jay Leno learned this lesson some years ago. In 2009, while the economy was suffering through the Great Recession, Mr. Leno, a car enthusiast, generously performed two free “Comedy Stimulus” shows for unemployed workers near Detroit.

Yet zero is not, as economists put it, the equilibrium price to see a live performance by Jay Leno. Some of the unemployed who received free tickets tried to turn around and sell them on eBay for about $800. When Mr. Leno learned about this, he objected, and eBay agreed to take down offers to resell the tickets.

But why should Mr. Leno have objected? Some unemployed workers, presumably short on cash, thought that the $800 in their pockets was more valuable than an evening of laughs. Similarly, the ticket buyers would voluntarily give up their $800 for a seat. The transaction makes both buyer and seller better off. That is how free markets are supposed to work.

The only person made worse off by the sale is, perhaps, Mr. Leno himself. He wanted to be seen performing before an audience of the unemployed. Doing a show for higher-income residents of Michigan might not be viewed as altruistic, even if it left the unemployed better off. In other words, Mr. Leno’s objection to the eBay resale was arguably a rationally self-interested act in that the resale impeded his ability to appear selfless to others and, even, to himself.

Although I don’t object to ticket resales above face value, and I think it is pernicious when others do, I was saddened by my “Hamilton” transaction in one important way. About 80 percent of what I paid went to the ticket reseller, rather than to Mr. Miranda and his investors.

In the past, Mr. Miranda has objected to the automated software that quickly buys as many tickets as it can, so they can be resold at a profit. But there is an easy way to put these resellers out of business: The theater can charge higher prices to begin with.

Such a move would surely increase the show’s profitability. From my standpoint as a theater consumer, that’s a good thing. Future talents like Mr. Miranda would find it easier to fund their innovative theater projects. And with more projects funded, those consumers who don’t buy “Hamilton” tickets — perhaps deterred by its uniquely high prices — would find a greater variety of other shows from which to choose.

Those who run Broadway theaters clearly feel some unease about charging so much. That is one reason they often hold a few tickets back and offer them cheaply in lotteries the day of the show.
Yet Mr. Miranda and his investors could find better ways to give back to the community than vastly underpricing most “Hamilton” tickets and enriching ticket resellers. Maybe fund scholarships for theater students. Or maybe fill more seats with high school students (which is already happening to some degree, thanks to a grant from the Rockefeller Foundation)."

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