Monday, May 28, 2012

Is Jack White an Economist?

The rocker, Jack White, issued a vinyl album and limited the number of albums produced to meet the demand from some fans for something rare, ineresting and valuable. He recognized that rare and valuable had to go together.  Instead of selling them for a regular price, and letting the price rise in the secondary market, his company sold them on e-Bay and captured the higher price themselves. As one might expected, many fans were upset and complained of exploitation. He countered with some basic economic analysis. For an article on this in Forbes, see here

There have been economics articles on why ticket prices for concerts or sporting events are not higher when the demand for the event is much greater than the supply at the sale price. Examples include concert tours of big acts and the Super Bowl. Selling ticket prices for a concert at the market-clearing price may not be the long-run profit-maximizing strategy because the fans who buy the CDs may not be able to afford the concert tickets, and the group wants to keep them as fans. Even if they fail to obtain a ticket to the concert, they blame it on the popularity of the group rather than the ticket price.  In the Jack White example, the album is probably a one-time thing so the long-term consequences are likely to be slight.  Another rationale for the lower ticket prices for concerts is that there are other revenues to be had. For example, t-shirts and gear advertising that the fan attended the concert.  The profits from these are likely to be greater if the fans at the concert and younger.

Question: the article refers to a rock star who attended the London School of Economics and you can see who the star is by clicking on the link. Do you know who it is? (I did, and actually used it in an extra-credit question in History of Economic Thought. No one got it right.).

No comments:

Post a Comment