Can Musicians and Fans Benefit When a Primary Ticket Platform Controls the Resale Market? Theory and Evidence

Abstract

Consumers can buy concert tickets from primary platforms (e.g., Ticketmaster) or from consumer-to-consumer resale platforms (e.g., StubHub). Recently, Ticketmaster has entered and been trying to control the resale market by prohibiting consumers from reselling on competing resale platforms. Several states in the U.S. have passed or are discussing laws requiring tickets to be transferrable on any resale sites, worrying that platform integration—Ticketmaster controlling both the primary and the resale platforms—will increase ticket service fees and harm musicians and consumers. This paper establishes a game-theoretic framework and shows that the opposite can happen: platform integration can lower the service fees in both markets, alleviating double marginalization in the primary market and benefiting the musician and consumers. Moreover, with platform integration, the presence of a small number of scalpers can counterintuitively reduce the ticket price and benefit the musicians and consumers. Additionally, platform competition in the resale market may harm consumers. This paper further shows that these insights apply in other markets, e.g., used-good or peer-to-peer product-sharing markets, and provides suggestive empirical support for the theoretical results.