Tag: common resources

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The problem of getting people to pay to watch the show

Every summer a number of air shows take place in the UK, such as those at Farnborough, Cosford and the Royal International Air Tattoo. Some of these events prove to be extremely popular and successful. For example, over 50,000 people attended the event at Cosford on Sunday 9th June to watch a five-and-a-half-hour flying display, including the Red Arrows, a Vulcan bomber and a RAF Battle of Britain Memorial Flight, which featured Spitfire, Hurricane and Lancaster aircrafts.

The event was so popular that some people who had paid £25 for a ticket failed to make it to the show ground because they were stuck in a 9 mile traffic jam! The popularity of these events does raise an interesting economic question. Why do so many people pay to attend when it is possible to watch much of the air show from outside the showground? If people can enjoy the benefits of watching an event whether or not they have paid then we might expect the majority of them not to pay.

Air shows seem to have some of the characteristics of a public good: i.e. to some extent the consumption benefits are both non-rival and non-excludable. By non-rival it is meant that one person’s use or consumption of the good does not decrease the quantity available for somebody else to use or consume. If one person watches the Red Arrows fly by, it does not decrease the ability of others to watch them. Contrast this with a product that has the characteristic of being ‘rival’ such as a hamburger. If someone eats a hamburger, it reduces the amount that is available for others to enjoy. The good is ‘used up’ during consumption. Other people cannot eat the same hamburger!!! Many sporting and music events share this characteristic of non-rivalry. For example if somebody is watching a band playing live at Glastonbury it does not stop somebody else from enjoying the benefits of watching the band. The performance of the band is not ‘used up’ like the hamburger when a person watches the show.

The major difference between Glastonbury and an air show is that the event organisers at Glastonbury can prevent people who have not paid for a ticket from enjoying the show. The event is excludable, as fans have to enter the show arena in order to see the bands. However, as one contributor to an internet discussion site commented:

Air show organisers are at a particular disadvantage compared to other show organisers because the key elements of their show can be seen for miles.

Another contributor added that:

Unfortunately being an air show by its very nature it’s very public – the planes are in the air for everyone to see for free for miles around.

In other words, air shows have the characteristic of being non-excludable, as people can benefit regardless of whether they have paid or not.

These public good properties seem to be causing problems for an air show in Welshpool that appears to have an issue with a number of non-payers watching the event. The organisers recently stated that:

We can’t stop people watching from the hillsides, but perhaps we can make them understand that they need to come to the show and pay.

The previous year the organisers had sent people out with buckets to collect voluntary donations from those sitting on the hillside. However they found that:

People were not for giving much at all and it was noticeable how much copper was in the buckets we’d used and there were hardly any notes.

One solution being proposed in order to generate more revenue is to increase the entry fee, which is currently £5, in order to compensate for those who are not paying.

Articles

Bob Jones Memorial Air Show urges people to buy tick BBC News (9/6/13)
How to make an airshow pay PistonHeads, (9/6/13)
Free or should you pay Talk Photography, (9/6/13)
An organisers view Airshow, (9/6/13)
Cosford Air Show pledge over traffic chaos Shropshire Star, (10/6/13)
RAF Cosford Air Show – Home RAF Cosford Air Show, (12/6/13).

Questions

  1. What practical problems does a show such as Glastonbury face in trying to make the event excludable?
  2. In the blog it explains how one person watching a band live does not have a negative impact on the pleasure other people will derive from watching the same band: i.e. it is non-rival. Is this always true? Can you think of any circumstances when watching a live band might become a rival good?
  3. What term do economists use for goods that are non-rival but are excludable? Think of at least three examples.
  4. What ideas might the organisers of an air show adopt to encourage people to pay and enter the show ground area?
  5. Can you think of any strategies that might be used to increase the number and size of the voluntary donations made by those who watch the airshow for free from a hill-side?
  6. What are the organisers assuming about the price elasticity of demand for the air show at its current price if they claim that increasing prices will lead to an increase in revenue?
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Surviving troubled waters

In times of recession, some companies can do well, even in industries where there are supply problems. One such example is Pacific Andes, a Hong Kong based frozen seafood firm. Many fishing companies have found times tough in an era of dwindling fish stocks and fishing quotas imposed by governments anxious to preserve stocks. The following article looks at Pacific Andes and how it has managed to prosper despite supply challenges and the global recession.

Casting a wide net The Standard (Hong Kong) (24/8/09)

Details of overfishing in the UK can be found at: EyeOverFishing
The site provides a “map of the UK fisheries system, the problems with it, and solutions that are possible today”.

Questions

  1. To what extent can the concept of income elasticity of demand be used to help explain why Pacific Andes has managed to prosper during the recession?
  2. What specific business strategies has Pacific Andes adopted and why?
  3. Why, if overfishing is to the detriment of the fishing indsutry, do fishing fleets still overfish many parts of the oceans? Explain why this is an example of the ‘tragedy of the commons’.
  4. What would you understand by an ‘optimum level of fishing’ for a particular type of fish in a particular part of the oceans? Explore whether the concept of a ‘social optimum’ in this context is the same as an ‘environmental optimum’?
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Tragedy of the commons – or glory?

The ‘tragedy of the commons’ refers to the overuse of common land. If people can freely graze their animals on such land and have no responsibility for maintaining it, then the land will be overused and everyone will suffer. The problem is that the benefit of using the land occurs to the individual whereas the cost is collectively incurred.

There are many modern examples of the tragedy of the commons and the articles below look at some of them. Perhaps surprisingly, not all cases of the use of common resources end in tragedy; some common resources are used sustainably. A more thorough analysis must involve deeper questions of human motivation and behaviour.

IT’s tragedy of the commons Datamation (IT Management) (8/4/09)
The Tragedy of the Commons TechFlash (7/4/09)
Encarta’s failure is no tragedy Guardian (7/4/09)
How Self-Interest Destroyed The Economy The Huffington Post (23/3/09)
What does The Pirate Bay ruling mean for the web? Telegraph (17/4/09)
Tragedy of the Commons The Manila Times (23/3/09)

Questions

  1. Explain how the tragedy of the commons arises and give some examples other than common grazing land.
  2. How and why does the tragedy of the commons occur in information technology? Consider the benefits and costs of the ‘fix’ to the problem advocated in the first linked article.
  3. Does the case of Wikipedia (see the third linked article) disprove the proposition that common resources will be overused?
  4. To what extent is free access to content (music, newspapers, videos, books, etc.) a tragedy of the commons? Is the only solution to devise an effective charging model that rewards content creators?