Solving the Taylor Swift's Ticket Problem with 3 Market Designs

How to solve the Taylor Swift concert ticket problem with 3 market designs?

Hint: I think this is where NFT may be actually helpful.

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Recently a friend told me that Taylor Swift’s live ticket is being traded for thousands of dollars (premium?) on secondary markets. Why is this wrong and bad?

Because this is unfair to consumers since professional resellers can use bots to balk purchase tickets, crowding out genuine fans. Although mechanisms such as “Verified Fans” has been used to try to filter out the resellers, they were proven to be ineffective.

Plus, the monopolistic platform does not have the economic incentive to develop these countermeasures unless there are regulations in place to punish them for the presence of bots.

Why is this happening? Several market characteristics incentivize resellers to participate:

  1. Tickets can be resold. Unlike an airline ticket, you can just give your Taylor Swift ticket to somebody else.
  1. There are secondary markets that facilitate these transactions. If the transaction is entirely over-the-counter, trust issues can deter most buyers since anyone can claim they have the ticket before you hand them the money.
  1. It’s profitable.

To this end, it is important to know what the goal really is.

  1. We want fans to be able to get the ticket they want, not the resellers.
  1. We also want fans to be able to trade tickets among themselves in the case of a schedule change.

So, how do we achieve these goals?

Consider the following rules:

  1. Each ticket is connected to an ID (with a legal name on it).
  1. However, tickets cannot be transferred directly to another individual. It must be transferred back to the official seller, who will list it on an open auction market.
  1. Each time the ticket is transferred, 100% of the price premium is given back to the artist (or charity, or a combination of both).

These three rules together destroy any incentive for resellers to participate.

Rule #3 guarantees that any price premium will be taken away, so nobody can benefit from reselling. Rule #1 and rule #2 ensure that resellers cannot engage in P2P trading, bypassing rule #3.

This market structure also allows for some exciting ways of promoting fairness and equity. For instance, it is possible to actually air-drop free tickets to fans on a massive scale (maybe 10% of the total volume?).

Because there is no incentive for reselling, you are guaranteed that you are giving it to those who want to attend in person.

However, it does create some minor inconveniences. For example, if you cannot go to the concert, you cannot just give it to a friend, but has to put it back on the auction. One possible workaround is to provide a finite list of “transferrable personnel” at the time of purchase.

Of course, these rules can be implemented on a centralized platform such as TicketMaster.

Even better, the artist should consider launching their own platforms to ensure total control and avoid the anti-competitive pricing of the monopolistic TicketMaster ($100+ convenience fee?).

The more interesting idea is to build a ticket system using NFT. There are two main benefits of doing so:

  1. The artist can write some smart contracts to enforce the above rules rather than investing millions to build their own centralized platform that is capable of handling a lot of traffic.
  1. This would make the ticket a collectible (rather than the ugly paper ticket or the ticket in your Apple Wallet)

I believe this is how NFT can truly provide positive utility to society. Just some quick thoughts after I heard the news last night from a friend. Looking forward to some discussions!

Last updated: November 17, 2022

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